Have you ever wondered how giant investors and billionaires like Warren Buffett make trades? Does he use a regular broker like most traders? Find out the answer here.
Warren Buffett has been participating in the stock market since he was 11 years old. Today, he is one of the wealthiest and most influential investors in the industry. He's ranked 5th on the Forbes 2022 Billionaires list and was the eighth-richest businessman of the 2021 Forbes 400. As of February 2023, the "Oracle of Omaha" had a net worth of $108 billion.
Buffett is widely known as both a savvy businessman and a generous philanthropist. He's also the CEO and chairman of Berkshire Hathaway Corp – a famous holding company for a wide range of businesses in insurance, rail transportation, manufacturing, and more.
As one of the world's most successful investors, it's not surprising that Warren Buffett is highly popular among traders and investors alike. Many people are drawn to his investment philosophy and curious about his secret of success. Does he use a regular broker? How does he make his investments without shaking the market? Read on to find out everything you need to know about it.
Warren Buffett's Way of Investing
Warren Buffett is not your regular investor. He likes to invest in a company and then hold the stock for at least a few years to gain long-term benefits. When deciding where he wants to invest his money, he uses the value-based approach, which basically measures a company based on its strong fundamentals, long-term growth, and high return potential. Long story short, he not only sees how the companies are performing in the market but looks at the company as a whole.
Now, the problem with big investors is that they tend to open big positions, which means it's difficult to invest without heavily impacting the market prices. This is why an investor like Warren Buffett needs to use a personal or private broker. So, every time he wants to open a position, he would contact the broker who will then make the order and handle the rest. The broker needs to work in discreet so that the market wouldn't find out that a giant investor like Warren Buffett was involved.
Who is John Freund?
John Freund is a stockbroker that has been working closely with Warren Buffett since the mid-1980s. They met at Berkshire's annual meeting and began to talk with each other ever since. Over the years, Freund has traded shares of global companies like IBM Corp., Coca-Cola Co., PetroChina Co., and Wells Fargo & Co. for Buffett and his company. He and his team at Citigroup had to ensure Buffett's trade privacy, considering how big the impact could be if the information is leaked.
Not only that, but Freund also played a big role in a quite unpleasant event in recent Berkshire history. On March 14, 2011, Freund called Mr. Buffett to congratulate him on Berkshire's decision to buy a chemicals company, Lubrizol Corp, only to find that Buffett was just as surprised as he was. Earlier, Freund had also learned that his investment bankers from his workplace, Citigroup, had also been involved in the deal.
It was not until the release of the Berkshire audit committee report that Buffett knew about Citigroup's involvement. At first, the idea of buying Lubrizol was brought forth by his best colleague and potential successor, David Sokol, who apparently owned $10 million worth of shares of the company. Mr. Sokol claimed that he only learned about Lubrizol after owning the stock, but official Citibank and Lubrizol accounts of the merger stated otherwise. According to them, Sokol had only bought the shares after a series of discussions, in which it was pretty clear that Berkshire was already targeting Lubrizol.
Naturally, Buffett started to examine Sokol's role more closely after the report. Not long after, Sokol resigned from Berkshire but said that it had nothing to do with the Lubrizol case. Two years later, the Securities and Exchange Commission ended its investigation of potential insider trading by David Sokol with no charges.
Despite being the broker of the famous Warren Buffett, there's actually not much information about John Freund on the internet. He graduated from Columbia University's business school and he's married to a woman named Penny. He started his career with Salomon Brothers back in 1970 where he reported to Michael Bloomberg and worked with Michael Corbat, the future CEO of Citigroup. In the 1980s, he started talking to Warren Buffett and began to work closely with him as his stockbroker.
Another thing we know is that after 44 years of dedication, John Freund is going to retire from Citigroup this March. However, it's still unclear how this is going to affect his relationship with Berkshire Hathaway Inc. and the billionaire Warren Buffett himself.
Summary
To summarize, Warren Buffett mostly doesn't use regular brokers like the majority of retail traders around the world. Instead, he prefers to make trades through a private stockbroker like John Freund in order to ensure that his movement is discreet and won't cause huge price swings in the market. Alternatively, big investors like Buffett may also negotiate deals directly with the company for a complete takeover or other special conditions. These billionaires surely know that they have so much power in their hands, so it's crucial for them to calculate every move really closely. They might hire a professional financial advisor as well to listen to their ideas and give them feedback on their portfolio.
Different from Warren Buffett, other millionaire traders still use brokerage companies to execute their trades. What kind of brokers do they use?
20 Comments
Mar 10 2023
How did Buffett make his trades before he met John Freund? Did he use regular stock brokers like most retail traders?
Mar 16 2023
@Gerry: As far as I know, before Warren Buffett met his buddy John Freund, he actually used regular stockbrokers, just like most retail traders do. You know, in the early days of his investment journey, Buffett worked with different brokers to handle his trades. But here's the interesting part: even back then, he had this unique and disciplined approach to investing. He was all about long-term value investing, always on the lookout for undervalued companies with solid fundamentals.
It was through his friendship with John Freund that Buffett got a glimpse into the world of institutional investing. Freund, being a successful money manager, shared his professional insights with Buffett. He introduced him to techniques used by the pros, like doing in-depth fundamental analysis and evaluating businesses based on their intrinsic value.
With Freund's guidance, Buffett shifted from just trading individual stocks to building a concentrated portfolio of carefully chosen companies. He honed his investment strategy and started putting more emphasis on a company's underlying value and its long-term growth potential. And you know what? This approach, combined with Buffett's exceptional business and investment skills, eventually made him one of the most successful investors in history.
So yeah, before meeting Freund, Buffett was doing his thing with regular stockbrokers. But thanks to that friendship, he got a whole new perspective on investing and it played a big role in shaping his remarkable success story.
Mar 13 2023
What is Warren Buffett's investment philosophy and why is it so popular?
Mar 16 2023
Sometimes I look at these billionaires and wonder how they did it. I mean, it's hard to imagine that a lot of them started trading in their 20s and end up featured in Forbes' billionaire list. I read a lot of their stories, and most of them had hit rock bottom with their trades. Yet, they managed to come back stronger and eventually got out of that hole.
I've been trading for about 2 years now, but I don't really feel much of a difference in my skills to be honest. I still get losing trades every now and then, which is quite frustrating. I still enjoy trading, but I don't really put much hope into it these days.
Mar 17 2023
Man, I totally relate to that.
Last year, I almost quit trading because I felt stuck and I didn't want to lose more money even though I was so passionate about my trades. Then I realized that there's a difference between loving what you do and doing it right.
Trading is essentially just a big mental game and risk is a big part of that. I mean, THE Warren Buffett lost about $23 billion in the Financial Crisis of 2008 and he's one of the most well-known traders in the world. So, even though it's risky, we need to learn to accept it and keep improving ourselves.
Mar 16 2023
Warren Buffett is indeed an admirable man, I've read a bunch of his success stories and I'm just simply in awe. He's the type of trader who really knows what he's doing with his trades. However, if Warren Buffet's strategy is really that good, then why don't more traders copy his way?
Mar 18 2023
Actually, many people do try to copy Warren Buffett but in reality, it's not that easy to make profit simply from copying. First of all, Buffet's investment philosophy and strategies are pretty simple in concept, but difficult to execute. One should understand that markets change all the time, so following Buffet's strategy in the 1990s may not work as well today as it had back then. Aside from that, some moves are simply not replicable because of the size.
And lastly, Warren Buffett is not always right. He makes mistakes too, just like any other trader. So, blindly copying his moves without doing your own work is not a great strategy. Instead, it's better to do your own research and eventually develop a strategy that works for you.
Mar 17 2023
I get why the Warren Buffett needs a "personal" stock broker to conduct his trades in discreet, but what about other big investors? I mean, we all know there are also people like Elon Musk who likes to talk about his investment strategy online and what he's going to do with his stocks basically.
Jun 26 2023
@Sammy: So, you know how Warren Buffett likes to keep things on the down-low and has a personal stock broker to handle his trades in a discreet manner? Well, not all big investors roll like that! Take Elon Musk, for example. That guy loves to spill the beans about his investment strategies and what he's planning to do with his stocks. You can catch him sharing his thoughts and plans all over social media. It's like he can't resist the urge to talk about his investments! But hey, everyone's got their own style, right? While some investors prefer to keep things private, others, like Elon, enjoy being open and sharing their moves with the world. It's all part of their unique approach and personal preferences.
Mar 17 2023
It makes total sense that some professional traders like Buffett himself prefer to make their trades discreet to avoid shaking the market too much. I also just found out how big investors typically split their trade into several smaller trades for the same reason. They want to keep the price moves steadily according to their grand plan. And as a retail trader, apparently it's important to be able to identify where the "smart money" is going to make profit. I learned it all from here: How to Trade with Smart Money Strategy
Mar 20 2023
Basically, the Forex and stock market cannot be accessed through the money market, and even Warren Buffet needs personal brokers. What interests me is the role of personal brokers. Is it just one person who can facilitate you in the stock market, or can it be a personal company? If you use a personal broker, can you get leverage, or do you need to use your full funds to trade?
Also, are personal stockbrokers like the ones depicted in the movie "The Wolf of Wall Street," or is their work different?
Mar 20 2023
If you want to trade in the Forex or stock market, you can't just use your own money. Even Warren Buffet needs personal brokers to help him out! These brokers can be just one person or work for a company - it depends on what you prefer. And if you use a personal broker, you might still be able to get leverage, which lets you borrow money to increase your trading power.
You might be wondering if personal brokers are like the sketchy ones in "The Wolf of Wall Street" - but don't worry, most brokers are ethical and want to help you make good investments. Their job is to give you advice, help you buy and sell stocks, and keep an eye on your portfolio.
Mar 20 2023
As the information, Stockbroker is a professional who facilitates the buying and selling of stocks and other securities on behalf of their clients. Stockbrokers work for brokerage firms and are licensed and regulated by financial authorities. They act as intermediaries between buyers and sellers of securities, and their main job is to execute trades based on their clients' investment goals and preferences.
Stockbrokers can provide investment advice, research and analyze stocks and other securities, and manage their clients' portfolios. They can also offer other services such as financial planning and retirement planning. Stockbrokers earn a commission or a fee for their services, which is usually a percentage of the value of the trade or the assets under management.
Stockbrokers play an important role in the financial markets, as they help investors access the stock market and other securities markets, and provide valuable insights and advice to their clients.
Mar 20 2023
I'm curious, how much money did Warren Buffet invest in companies? I know that generally, the more money you invest, the more profit you can make (or lose!). Also, Buffet is a stock investor, right? How does stock investing compare to Forex in terms of risk? Can Forex traders be as successful as Warren Buffet? Could you give me an example of a successful Forex trader like him? Thanks!
Mar 20 2023
Warren Buffet invests a lot of money in companies, but the exact amount varies. He likes to invest in companies with strong fundamentals that are undervalued by the market, and hold on to them for a long time.
Stock investing is generally less risky than Forex trading because it's easier to predict the long-term growth of established companies than the short-term movements of currencies. However, both types of investments carry risks and require careful analysis and strategy.
It's possible for Forex traders to be as successful as Warren Buffet, but it takes a lot of skill, knowledge, and experience. One Forex trader who's often compared to Buffet is Paul Tudor Jones, who made a fortune trading currencies in the 1980s. Jones is known for his macroeconomic analysis and his ability to spot trends in the global economy.
Mar 26 2023
What is the biggest and most profitable investment that Warren Buffett has ever made?
Jun 7 2023
@Kelly: When it comes to Warren Buffett, the investment guru himself, he's had some seriously big wins in his career. But if we're talking about his biggest and most profitable move, it's gotta be his investment in Coca-Cola. Yep, you heard it right. Back in the late 80s, Buffett saw the potential in that fizzy beverage giant and started gobbling up shares like there was no tomorrow.
And let me tell you, that bet paid off big time. The value of Buffett's investment in Coca-Cola skyrocketed over the years, bringing in some serious cash and making it one of his most profitable moves ever. It's like the bubbles in a Coke, popping with profits.
But hey, let's not forget that Buffett's success isn't just about one investment. The man's got a knack for picking winners, and his portfolio is full of other gems like American Express, Apple, and Wells Fargo. So yeah, Warren Buffett knows a thing or two about making some sweet moolah in the investment game.
Mar 28 2023
Why do big investors need to use private stock brokers?
Jun 13 2023
@Harold: Big investors dig private stock brokers for a bunch of good reasons. These brokers know how to give 'em that VIP treatment they deserve. They customize their services to match the specific needs and goals of these high rollers. And guess what? They've got access to some seriously exclusive investment opportunities that regular folks can only dream of, like those fancy private placements and IPOs. These brokers have a killer network too, so they can hook big investors up with some sweet deals. Plus, they do all the legwork with in-depth research to help diversify their portfolios and manage risks. And let's not forget about privacy. These private stock brokers keep things hush-hush, making sure those fat cat investors' financial deets stay locked down tight. So yeah, if you've got stacks of cash to invest, having a private stock broker on your side is like having a personalized financial wizard catering to your every investment whim.
Jul 3 2023
What are the potential disadvantages of relying on a personal broker, as demonstrated in the case of Warren Buffett and John Freund? How does the lack of transparency and control over the broker's actions impact the investor's decision-making process and overall trust in the broker? In what ways can the lack of public information about a personal broker, as seen in the limited information available about John Freund, raise concerns about their background, qualifications, and potential conflicts of interest? Can the case of David Sokol and the allegations of insider trading by a potential successor to Warren Buffett serve as a cautionary tale for investors who rely solely on personal brokers? How can investors mitigate the risks associated with using a personal broker and ensure they are prioritizing the investor's best interests?