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Warren Buffett has achieved an incredible compounded return of 19.4% per year since taking control of Berkshire Hathaway (BRK.B) in 1964.
So it’s no surprise that most people want to mimic his success.
Heck, if you do a Google (GOOGL) search for “how to invest like Warren Buffett,†you’ll receive about four million results.
But here’s the thing: Each of those links represents a misguided perception that you or I can actually invest like Buffett.
And the people who click the links are victims of this delusion.
As the recent mega deal between H.J. Heinz and Kraft Foods Group (KRFT) clearly shows, everyday investors have absolutely no chance of achieving success like Warren Buffett.
Buffett Enters Another Multi-Billion-Dollar Deal
The Kraft-Heinz merger was announced on March 25 and is valued at about $49 billion, according to The Wall Street Journal.
Working with Brazilian private equity firm 3G Capital Partners, Buffett helped orchestrate a deal that will give Heinz shareholders a 51% stake in the new, combined firm. Kraft shareholders will have a 49% stake (in addition to receiving a $16.50-per-share special dividend).
Previously, Buffett had worked with 3G to acquire Heinz for $23 billion in 2013. And even that smaller deal demonstrated how Buffett profits in ways not accessible to everyday investors. In acquiring Heinz, Buffett received a massive number of special preferred shares (in addition to the common stock) that paid a hefty 9% dividend. Last year alone, Berkshire raked in $720 million from these assets.
Now, that dividend will go away with the merger. But Berkshire will own roughly a quarter of the new entity, which will be the fifth-largest food company in the entire world and the third largest in North America.
This is obviously a far cry from buying Dividend Aristocrats and holding them for the long term. It’s a nice idea, but it’s simply not how Buffett makes the vast majority of his money.
