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The Ultra Rich Didn’t Get Wealthy by Investing in Stocks

Adam Othman
·4 mins read
Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept

Have you ever wondered how the wealthiest investors in the world become as wealthy as they are? Looking at Warren Buffett might make you think that the wealthiest investors in the world enjoyed their success due to wise investment decisions. However, the reality is that Warren Buffett could be a rare exception who became rich through stock market investing.

The rich don’t always use stocks to create wealth

Contrary to popular belief, the richest investors do not seem to use stock market investing to generate their immense wealth. The wealthiest individuals use the stock market to maintain the wealth they have already acquired.

The wealthiest people on the planet did not acquire their wealth through wise investment moves on the stock market. Almost all of them made their immense wealth by starting companies that made it big or through a massive inheritance.

The rich only view the stock market as a vehicle to preserve the purchasing power of a fortune they have already collected. Warren Buffett is a rare exception to the rule. His investment returns over the decades have been nothing short of phenomenal. There is a reason why he is called the Oracle of Omaha: Nobody has been able to enjoy the kind of success that he has in the market.

Investing like Warren Buffett

Warren Buffett’s investments over the years are the reason for his success. Whenever you come across any headlines that are talking about the investment secrets of the super-wealthy, make sure that you’re careful about following their advice if it is anybody other than Buffett himself. If you want to become a successful investor, you should follow the advice of someone who became wealthy through investing – not someone who just remains wealthy because of it.

One of the primary reasons for Buffett’s success has been his ability to recognize the deeper value behind a company. He invests in businesses that he understands and knows that the inherent value of the business is more than its evaluation at the time of investing. Enbridge Inc. (TSX:ENB)(NYSE:ENB) could be a deep-value opportunity that you could consider based on Buffett’s successful investing moves.

Enbridge is an energy infrastructure company with one of the most extensive pipeline networks in North America. It transports 25% of oil liquids in North America and 20% of the natural gas consumed in the US.

The oil price wars took a toll on all energy sector operators in Canada, and the COVID-19 pandemic made things even worse. At writing, the stock is trading for 29% below its February 2020 highs. However, the stock has consistently provided better than expected results amid the pandemic.

Enbridge enjoys a stable cash flow model. 98% of its revenue comes through highly regulated or contracted sources, and 95% of its counterparties have investment-grade credit ratings that can guarantee its income. While it is known as an oil pipeline company, Enbridge is continually diversifying its business and is even earning some income through renewable power generation.

Foolish takeaway

The ultra-rich became rich by leveraging family wealth or creating something unique that the world needed and becoming successful. Warren Buffett is the best example to consider if you want to become one of the wealthiest through stock market investing. While replicating his success might not be possible, you can emulate his strategies to become a successful investor.

Enbridge is an undervalued stock. The company produces predictable and growing cash flows, it offers a juicy dividend yield and has the opportunity to grow. Investing in Enbridge at its current price could prove to be a move that he would make.

The post The Ultra Rich Didn’t Get Wealthy by Investing in Stocks appeared first on The Motley Fool Canada.

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