Warren Buffett's Buddy and 2 Investing Tips

March 26, 2014
Greg Kelly

Not everyone can afford to buy a share in Warren Buffet's Berkshire Hathaway for $185,000, physicians can follow the simple investing advice he offered his own wife.

“Only when the tide goes out do you discover who's been swimming naked.”

—Warren Buffett

An old friend and neighbor of mine on the Jersey Shore, Jim Maguire, worked on Wall Street for over 60 years, during which time he had a close association with Warren Buffett.

If you know anything about money, you’ve heard of Buffett. Called the Oracle of Omaha for his unmatched investing skills and business prowess, he has a net worth of $58 billion, according to Forbes’ recent World’s Billionaires Issue.

Maguire, who retired from the securities business just last year, was the main trader for Buffett’s investment holding company, Berkshire Hathaway. Maguire was called “Chief” by his colleagues on the New York Stock Exchange for his ability to get along with all people and to get things done.

Connecting with millions

Maguire first hooked up with Buffet in 1988, a year after the Crash of 1987 (the worst market decline in all US securities history), when the investor was looking for a bigger market for his Berkshire Hathaway stock. As a stock specialist “it was my job to make a public market for him and others,” Maguire told me.

Maguire said Buffet’s phone call to him came “out of nowhere.”

“I was told he did his research, was a very careful person, and is very particular about who handles his business,” he recalled. “I guess he thought I was capable.”

When Maguire was told the stock was high priced (then trading at $4,700 per share), he at first thought the investor was a relation to Jimmy Buffett.

“I didn’t think there was that much money in music,” he remarked.

After doing his own research, Maguire took on the task and for some 25 years was the market maker for the ultimate “blue chip” stock.

From the business association, Maguire said, “a lasting friendship was born,” and the 2 men spoke often. Buffett is a “very regular guy” who has auto license plates that read “THRIFTY,” Maguire told me.

He described Buffett “as very witty, loyal, not at all pompous, and generally undemanding; although I wouldn’t want to be on the other end of a bargaining table with him.”

Buffett started his investment holding company Berkshire Hathaway (originally a Massachusetts textile firm) in the early 1960. A $1,000 investment in Buffett’s company then would be worth more than $5 million today. A single Class “A” share of the stock recently cracked the $185,000 mark; the Class “B” shares are about $125. The company, valued today at about $225 billion, has large holdings in American Express, Coca-Cola, Wal-Mart, P&G, Wells Fargo, IBM, Wrigley, and GEICO.

Warren’s Ways

In my own reading about Buffett, I found 2 very interesting stories:

• One of the first backers of Buffett’s investing efforts was a group of about dozen physicians who all put up $10,000. Leading the pact was Carol Angle, MD, a young physician from Buffett’s home state of Nebraska.

After attending one of Buffett’s investment seminars in 1957, she and her husband, also a doctor, backed Buffett financially and got several of their colleagues to invest as well. Today, Angle is worth more than $300 million. I’m told that Buffett remains very grateful for their early support.

• According to a recent New York Post column by Terry Keenan, physicians might want to listen to Buffett’s investment advice to his own wife. And it takes just one paragraph.

In his 2013 letter to shareholders Buffett writes:

“My advice to the trustee [for my wife] could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund.”

Buffett prefers “the low-cost Vanguard funds.”

Keenan concludes: “Don’t do what Buffett does. After all, he’s the 4th richest person on the planet and has more than 60 years of investing prowess under his belt. No, do what Buffett is doing for his wife.”