Devoted to Managers and those that seek to improve their management skills

Why Buffett Prefers to Buy Companies

It's interesting when thinking about Buffett to consider what his preferred way of doing business really is. Most think of Buffett as a great investor in stocks ... and he's all of that. But when you come right down to it, he's a much greater investor in companies than stock in companies. I mean by that he always prefers to buy companies outright, than to own stock in it. There are a couple of reasons for that.

The first is that any capital left over is able to be used in the way that Berkshire chooses to. Second, there are tax advantages to owning over an 80 percent stake in a company versus only holding its stock as a marketable security.

Buffett makes the general decisions to buy stock or own based upon the same principles, it's just that ownership is much more flexible and thus potentially lucrative than stock ownership is.

This is why those that own companies, even sole proprietors, end up being on the top of the financial food chain. Their money is available to these owners in a flexible way that other means of making money doesn't offer. And by that I'm referring to using it for superior returns and growth. I know that there are other ways to use money-holding vehicles to keep your money in, but most of them offer extremely low returns which may not even keep up with inflation.

What works great for Buffett is that even though he runs the company that owns many other companies, he doesn't need to be overly concerned about their management. He makes sure he has top-quality management in place so he can do what he does best and is the greatest value to shareholders.

Other Buffett Resources:

Wisdom of Warren Buffett

Warren Buffett, investor

Warren Buffett: The trouble with being a legend

Warren Buffett: 'I told you so'

Company growth