Warren Buffett bought 3,500 tons of silver in 1997. The purchase helped make Thomas Kaplan a billionaire.
Warren Buffett's purchase of almost 3,500 tons of silver in 1997 helped turn Thomas Kaplan into a billionaire. After the silver bubble burst in early 1980, the precious metal plunged in price from $50 an ounce to below $10, and it was widely dismissed as a bad investment. "What really put an end to it was when Warren Buffett bought [those] ounces of silver," Kaplan, the chairman of NovaGold Resources, told shareholders this month. "It became public that he had done this the week when I was taking my silver company public," Kaplan said. "That changed everything." Kaplan told Business Insider he personally thanked Buffett at a dinner years later. Visit Business Insider's homepage for more stories.
Warren Buffett made an unusual move in 1997 when he bought 111 million ounces, or nearly 3,500 tons, of silver. The famed investor's purchase helped make Thomas Kaplan a billionaire. "That changed everything" Kaplan was in his early 30s, with a doctorate in history from Oxford University but zero industry experience, when he founded a mining company named Apex Silver Mines in 1993. Despite his lack of credentials, he received a $10 million investment from billionaire investor George Soros in 1994. At the time, the global silver market was still recovering from oil tycoon Nelson Bunker Hunt and his brothers almost cornering it in 1979. The silver bubble had burst in early 1980, slashing the price of the precious metal from $50 an ounce to less than $10, and making it a toxic asset for many investors. "What really put an end to it was when Warren Buffett bought [those] ounces of silver," Kaplan, now the chairman of NovaGold Resources, said during the miner's virtual shareholder meeting this month, according to a transcript on Sentieo, a financial-research site. "I remember it vividly because there but for the grace of God, it became public that he had done this the week when I was taking my silver company public," Kaplan continued, referring to Apex. "And otherwise, not a very good time to be in the market, but that changed everything." Read more: Jefferies breaks down the top 22 stocks it thinks you should buy right now — including 6 fast-risers that just captured its attention Berkshire's wager Buffett and his partner Charlie Munger's silver investment didn't just benefit Kaplan. It also generated a pre-tax return of more than $97 million for their Berkshire Hathaway conglomerate, Buffett said in his 1997 letter to shareholders. The Berkshire CEO described the wager as a "return to the past" as he bought silver in the 1960s in anticipation of its demonetization by the US government. In 1997, he bet on the metal again as he predicted shrinking stockpiles would push up the silver price. "In recent years, bullion inventories have fallen materially, and Charlie and I concluded that a higher price would be needed to establish equilibrium between supply and demand," Buffett said in the letter. Bill Gates, the Microsoft cofounder and Buffett's close friend, must have come to the same conclusion. He took a stake in a miner, Pan American Silver, in 1999. Read more: The world's biggest investors are notoriously skeptical of the stock market's bet for a quick economic recovery — and warning that the 'fantasy' rally will soon come crashing down "Gold on steroids" Buffett's vote of confidence restored the perception of silver as a viable investment. "From that moment on, I never had to explain to people the rationale for owning silver," Kaplan said on the NovaGold call, referring to the metal having many industrial uses and serving as a store of value. "The fact that it has both components means that it's gold on steroids," he added. Buffett's endorsement of silver enabled Apex to list its shares successfully, paving the way for Kaplan to cash out most of his stock by 2004. He went on to score huge returns from investing in an African platinum miner and founding a Texas oil-and-gas company, both of which ballooned in value and were acquired in 2007. Today, Kaplan leads The Electrum Group, an investment firm focused on natural resources. He also heads up Panthera, an organization devoted to "big cat" conservation, and boasts the world's largest private collection of Rembrandts. The billionaire credits some of his success to Buffett's surprise bet on silver in 1997. "I owe him one," Kaplan told Business Insider, adding that Buffett's purchase was "one of a string of just ridiculous strokes of luck." Read more: 'Likely to be excruciating': A notorious stock bear says investor reliance on Fed money-printing is misguided — and warns of more than 50% crash from current levels Silver could surge again Precious metals are poised for another historic rally as investors seek to safeguard their wealth from the coronavirus pandemic, Kaplan predicted on the NovaGold call. "Buffett took his position at $4 or $4.50, and silver ultimately went back to $50," he said. "You're going to see something not dissimilar once again, in silver, but very much in gold." The Berkshire chief's dearth of stock purchases when the market tanked in March suggests he's worried, Kaplan argued, strengthening the case for investing in gold and silver. "We're in a world where Warren Buffett is standing aside — that's not his stock and trade during these crises," he said. "Anyone who listened in on his annual general meeting will see that this was not the same gung ho, 'you've got to buy this pullback,'" Kaplan continued. "That tells me that he, too, is looking for ways to preserve wealth and preserve value." There's no sign yet that Buffett is eyeing a return to silver or planning to pile into gold. But it's safe to say that Kaplan would welcome another boost from the Berkshire boss. Read more: The investment chief of a $12 billion wealth-management firm breaks down how to build the perfect portfolio using just 7 ETFs — one designed to sidestep a dramatically 'overvalued' stock marketJoin the conversation about this story » NOW WATCH: How waste is dealt with on the world's largest cruise ship
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Summary List Placement Samsung's chairman, Lee Kun-hee, died on Sunday at age 78. The boss of...Summary List Placement Samsung's chairman, Lee Kun-hee, died on Sunday at age 78. The boss of the South Korean conglomerate once counted Warren Buffett as a shareholder. Buffett, a billionaire investor and the CEO of Berkshire Hathaway, made "hundreds of millions" from a rare overseas bet on Samsung, he revealed in a CNBC interview in 2018. "It was a big, strong, good company," he said. Visit Business Insider's homepage for more stories. Samsung's billionaire chairman, Lee Kun-hee, died on Sunday at age 78 after an extended illness. He once counted Warren Buffett, the famed investor and Berkshire Hathaway CEO, as a shareholder. Lee's father, Lee Byung-chull, founded Samsung as an exporter of fish, fruit, and noodles in 1938. Lee took the reins in 1987 and helped grow the South Korean company into a sprawling global conglomerate with interests in consumer electronics, microchips, home appliances, medical equipment, life insurance, shipbuilding, and theme parks. Read more: GOLDMAN SACHS: Buy these 13 unloved vaccine stocks that have the potential to spike on positive treatment updates There are clear similarities between Samsung and Buffett's Berkshire Hathaway. Both own scores of businesses across numerous sectors such as insurance, energy, manufacturing, construction, transportation, and retail. Berkshire also holds billion-dollar stakes in Apple, Bank of America, Coca-Cola, American Express, and other public companies. The similarities may have been a factor in Buffett's decision to invest in Samsung, despite sticking to American businesses for most of his career. He revealed the rare overseas bet during a CNBC interview in 2018. Berkshire bought a "reasonable amount" of Samsung stock when it was trading at about 1 million won ($886) per share, Buffett said. That price equates to 20,000 won following the group's 50-for-1 stock split in 2018. The investor was drawn to the South Korean company's low valuation and robust balance sheet, along with the prospect of share buybacks. "It was very, very cheap," Buffett said. "They had a lot of cash. They hadn't done much buying of their stock but they'd talked about it." "It was a big, strong, good company," he added. Read more: 'The road to financial implosion': A notorious market bear says the Fed has set the stage for a 67% stock plunge — and warns of zero-to-negative returns over the next 12 years Berkshire set its sights on South Korea because stocks were "ridiculously cheap" following its financial crisis in the late 1990s, meaning there were "a lot of bargains," Buffett said. The investor and his team ultimately cashed out after Samsung's stock price surged about 80%. A weaker won also boosted their return in dollars. "We probably made in the hundreds of millions," Buffett said. "Might have been $500 million, $400 million, I don't remember exactly," he added. The estimated return suggests Berkshire invested about $500 million to $600 million in Samsung. Buffett's wager paid off handsomely, but he may have sold too soon. Samsung's shares have tripled in value since the time of Berkshire's investment, and now change hands at more than 60,000 won each.Join the conversation about this story » NOW WATCH: July 15 is Tax Day — here's what it's like to do your own taxes for the very first time
Chewy cofounder Ryan Cohen lays out the crucial skills he learned from Warren Buffett and his father, and explains why he's all-in on Apple
Summary List Placement Ryan Cohen ignored the naysayers when he cofounded an online pet-supplies retailer in...Summary List Placement Ryan Cohen ignored the naysayers when he cofounded an online pet-supplies retailer in 2011 and squared off against Amazon and Pets.com. He ultimately sold the company for $3.4 billion in 2017, and stepped down as CEO the following year to spend more time with his family and pursue personal goals. Cohen broke with convention again by investing the vast majority of his wealth in two stocks, Apple and Wells Fargo, and later placing a contrarian bet on ailing video-game retailer GameStop. The entrepreneur attributes his independent streak to the "two biggest influences on my professional life": his father, Ted Cohen, who passed away last December, and Warren Buffett, the billionaire investor and Berkshire Hathaway CEO. "Something critical that I learned from my dad and Warren Buffett was the ability to separate myself from the herd and think independently," Cohen told Business Insider this week. The pair's teachings allow him to "block out the noise, develop my own point of view, and not be influenced by daily headlines or the consensus or what's in style." For example, many people initially doubted Chewy would be able to ship 30-pound bags of pet food to customers and make any money. "In the early years, few investors thought Chewy was a good idea," Cohen said. "I struck out raising capital over 100 times." Ignoring the skeptics, as well as avoiding distractions and saying "no" to all but the best opportunities, enabled Cohen to focus on the things most critical to Chewy's success: competitive prices, compelling products, fast shipping, and personalized customer service. The former Chewy chief credited his dad, who ran a glassware-importing business, with giving him the courage of his convictions. Cohen's father taught him to trust his instincts, treated him like an adult from an early age, solicited and listened to his opinions, and demonstrated what it meant to deeply understand a business. "I learned how to build my company by watching him build his," Cohen said. Going all in After selling Chewy, Cohen plowed the bulk of his windfall into Apple and Wells Fargo, flouting traditional investment advice about the need for a diversified portfolio. Cohen felt comfortable with his decision partly because he bought his first Apple share at age 15, making it one of the first stocks he ever owned. The technology titan's ecosystem of hardware, software, and services — which makes it a headache for users to switch to rival products — was a key attraction, he said. Apple's offerings have become even more integral to people's lives during the pandemic, Cohen argued. People increasingly rely on their iPhones, iPads, MacBooks, and apps to keep in touch with friends and family, work from home, conduct daily tasks such as shopping and banking, and entertain themselves. "The strongest business in the world," Cohen proclaimed, echoing Buffett's comment in February that Apple is "probably the best business I know." Cohen also brushed off concerns about Apple's valuation, arguing that it's relatively cheap when rock-bottom interest rates mean bonds are yielding close to zero. Cohen declined to comment on his Wells Fargo and GameStop investments. Betting like Buffett Cohen's emphasis on focus, independent thought, and investing with conviction aren't the only strategies he shares with Buffett. The Chewy cofounder cited 'disciplined capital allocation," or spending money strategically and responsibly, as a key driver of his company's success. Buffett specializes in taking the cash flowing into Berkshire from its scores of subsidiaries, and redeploying it where it's needed most. Cohen focused on selling pet food at Chewy, because he recognized that customers would slash every expense they could before cutting back on feeding their pets, resulting in a "sticky" customer base. Consumables offered slimmer profit margins than toys or accessories, but the lifetime value of their buyers relative to the cost of acquiring them meant they generated higher returns in the long haul, he added. Buffett famously favors companies that sell essential or staple products and services to a dedicated customer base. For example, Berkshire counts American Express, Visa, Mastercard, Coca-Cola, Procter & Gamble, and Kraft Heinz among the roughly 45 stocks in its portfolio. Cohen and Buffett also have investments in common. Apple is by far the most valuable holding in Berkshire's portfolio, and the conglomerate owned $3.3 billion worth of Wells Fargo stock at the last count. Finally, Cohen practices Buffett's advice to "be greedy when others are fearful." "Value doesn't move but stock prices do, creating an opportunity if you have the right temperament to buy stuff on sale," he said.Join the conversation about this story » NOW WATCH: Why it's okay to eat the brown part of an avocado
Warren Buffett's Berkshire Hathaway is set to plow more than $550 million into Snowflake when the cloud-data company goes public
Summary List Placement Warren Buffett's Berkshire Hathaway is set to invest more than $550 million in...Summary List Placement Warren Buffett's Berkshire Hathaway is set to invest more than $550 million in Snowflake when it goes public, according to the cloud-data group's amended S-1 filing. The billionaire investor's company will buy about 3.1 million Class A shares in a private placement, and purchase another 4 million shares from former Snowflake CEO Robert Muglia. Salesforce's strategic venture arm has also agreed to invest $250 million in Snowflake stock. Berkshire's bet is striking as Buffett has historically stuck to companies he understands, and joins a string of unusual moves from Berkshire, such as investing in a gold miner and acquiring 5% stakes in five Japanese trading companies. Visit Business Insider's homepage for more stories. Warren Buffett's Berkshire Hathaway has agreed to invest $250 million in Snowflake when it goes public in the coming weeks, according to the cloud-data company's amended S-1 filing. The famed investor's conglomerate will purchase roughly 3.1 million Class A shares in a private placement, based on the $80 midpoint of Snowflake's expected IPO price range of $75 to $85. Buffett's company has also agreed to buy another 4 million Class A shares from former Snowflake CEO Robert Muglia in a secondary transaction, paying the IPO price for each share. That could cost it $303 million to $344 million based on the expected price range. Read more: Bank of America lays out the under-the-radar indicators showing that huge swaths of the stock market are 'running on fumes' — and warns a September meltdown may just be getting started If both purchases go through, Berkshire might spend upwards of $550 million for more than 7 million shares, representing about 19% of the 38.3 million Class A shares that Snowflake expects to be outstanding after its offering. Salesforce has also agreed to purchase $250 million of Snowflake stock through its strategic venture arm, Salesforce Ventures, the filing shows. Snowflake declined to comment in an email to Business Insider. Read more: GOLDMAN SACHS: Buy these 19 stocks right now for big future gains once a COVID-19 vaccine is available Berkshire's latest bet is striking as Buffett famously eschews tech stocks, preferring to invest in businesses he understands. It joins a flurry of surprising moves from his company, including its first investment in a gold miner and deep cuts to its stakes in JPMorgan, Wells Fargo, and other financial companies last quarter. Buffett's company also disclosed 5% stakes in the five biggest Japanese trading companies or "sogo shosha" last week, and bought $2.1 billion of Bank of America stock over 12 straight trading days to August 4. Snowflake was founded in 2012 and privately valued at $12.4 billion in February. Its revenues surged 121% year-on-year to $133 million in the the three months to July 31, helping to narrow its operating loss by 19% to $78 million.Join the conversation about this story » NOW WATCH: Here's what happens when two hurricanes collide