The Buffett Effect: Our 3 Favorite Founder-Led Businesses

Founder-led businesses have been outperforming other companies in the S&P 500 by three-to-one over the past 15 years. Here’s our 3 favorites

Oct. 18, 2019

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1. Amazon

Beginning life as an online book store in the ’90s, Amazon (NASDAQ: AMZN) has come a long way since, and in no small part due to its founder and CEO Jeff Bezos, otherwise known as Earth’s wealthiest man – great superhero name.

Not only has Bezos created an enormous amount of wealth for himself, but for shareholders too, with Amazon’s stock price growing tenfold since 2012 alone, while the company is currently worth roughly 2000 times more than at the time of its 1997 IPO. On top of this, in the past 3 years alone, the stock has gained 132%, versus the S&P 500’s 41%, a very impressive return. Amazon’s cloud service subsidiary, Amazon Web Service alone is worth far more than the core business when it went public – $500 billion.

Bezos is an important factor in this! As the man who founded the company in 1994 and would personally bring books to the post office to post to buyers, there is no denying his passion for the company. He also has A LOT of money invested in the company’s performance, with over $100 billion worth of shares in Amazon as of August 2019. With so much at stake, there can be no doubts that Bezos’ best interests are aligned with the company.

Perhaps most importantly, at only 55 years of age, we can expect to see him at the helm of Amazon for several years to come.

2. Berkshire Hathaway

Next up is a company led by a man who is widely regarded as the greatest investor of all time – one such investment being Amazon – it’s Berkshire Hathaway (NYSE: BRK.A) and founder Warren Buffett, of course. 

Ok, purists will realise that we are cheating a little bit here, as Warren Buffett technically wasn’t the founder of Berkshire Hathaway, but he is the one that made it what it is today – let us briefly explain:

In short, Berkshire Hathaway was a failing textile manufacturer dating back to the early 19th century when Warren Buffett took control in 1964, ousting the original founders. Today, it is a completely different company, with holdings in every industry under the sun, from Coca-Cola to Duracell to Amazon; this is no longer a textile company. 

In his 50(ish) years as CEO of Berkshire Hathaway, Buffett has turned his company into a certified cash cow of the highest order, more than doubling cash flow in the past decade alone. With a stock portfolio worth $200 billion and a further $100 billion in cash just waiting to be burned (not including its core insurance business), Berkshire is certainly in a good place. 

This success can be attributed to the ‘Oracle of Omaha’ himself, as it has been Buffett’s keen eye for an investment that has led to such growth, and with over 60 subsidiaries, all focused on long-term growth, Buffett’s conglomerate can weather almost any storm.

3. Netflix

Though it has been going through a turbulent period in its relatively young life, one of the greatest success stories in the last 20 years goes to Netflix (NASDAQ: NFLX) and its visionary founder Reed Hastings. It certainly has been a long and bumpy ride for Netflix shareholders, and Hastings has been with them every step of the way. 

A remarkable case study of the man’s character took place in 2011, following a bungled attempt to split its DVD business from its streaming service, which came on the heels of a massive price hike, causing hundreds of thousands of subscribers to flee and a severe sell-off in Netflix stock. Hastings took his lumps, apologized, reversed the decision and doubled down on the consumer experience. As the old adage goes: the rest is history. 

Boasting more than 150 million followers as of its July earnings report, the company is still a force to be reckoned with, despite growing concerns surrounding declining membership and increased competition. Netflix is still the pinnacle of media streaming, and has fought through adversity and threats to existence, coming out the other side stronger, and it is possible that 2019 will be looked at as but a blip.

With Reed Hastings at the helm, the company has increased by almost 35,000% in value, in one of the most incredible tales from Silicon Valley, and still remains the king of streaming. 

Long live the king!

MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in Amazon, Berkshire Hathaway, and Netflix. Read our full disclosure policy here.