According to Warren Buffetta, the first rule of investing is not to lose money. But his investment vehicle, Berkshire Hathaway (Nyse: brk.b), I just recorded a record worth USD 3.8 billion in the value of one of its investments.

You can safely say the company’s investments in Kraft heinz It was not one of the most successful ventures. But – as usual – Buffett is a step forward.

Kraft heinz

In its update of earnings in the second quarter, Berkshire registered a value worth USD 3.8 billion, as a result of which the company reported a decrease in net income compared to the previous year.

The inscription reflects the combination of a change price of Kraft Heinz and the company’s financial prospects. But unless something happens in the future, the impairment is tough. Kraft Heinz undergoes a strategic review, which may include separation of the spice unit from the food division. This is rarely a sign of a company that shoots all cylinders.

Berkshire also gave up places on the board of the company, which is also not a good sign. But despite all this, Buffetta’s investment was not a disaster.

Investment structure

His investment in activities is not as ordinary retail investors can do. As part of the initial investment, Berkshire received USD 4.25 billion preferred with 9% dividend profitability. They returned USD 1.3 billion in cash before they were purchased (for USD 4.25 billion) in 2015. This means that Berkshire received more than half of its initial investment from the same.

In addition, the acquired shares of ordinary Buffett distributed USD 6.3 billion, and the remaining share has a market value of USD 8.8 billion. This implies a total boost by over 100%.

The overall return is decent, but the key is the structure of the contract. Receiving more than half of the initial share through privileged and dividends significantly reduces the chances of losing money.

Berkshire Hathaway

Huge Berkshire Hathaway cash reserves can be a continuous growth when everything goes well. But he puts the company able to apply when extremely good possibilities appear.

The chance of investment such as Buffett in Kraft Heinz is not something that appears very often. And it is also not available to most investors.

This is only possible for companies with unusual financial strength – such as Berkshire Hathaway. And as I see it, it’s a huge part of what investing is about.

When I invest, I am looking for companies that have the opportunity to generate better phrases than I can deal with. That is why Berkshire Hathaway is my largest investment.

Possibility to buy?

Since Buffett announced his pension, Berkshire Hathaway shares have fallen by about 10%. And it makes sense – the company loses an extremely qualified general director.

However, I think that one of the other key Berkshire resources – its balance – is still intact. So I expect it to be in a robust position to take this opportunity for some time.

I want to buy shares in relation to the book (p/b) about 1.5. At the moment, the herd is slightly above, but I’m preparing because it is approaching this level.