One Investment Warren Buffett, Bill Gates And Michael Burry All Love

March 14, 2024

2 minutes read

The world’s biggest investors have more in common than you think. Warren Buffett gained his wealth through strategic acquisitions of businesses, while Bill Gates amassed over $125 billion through Microsoft Corp., which he founded in 1975. Michael Burry rose to prominence after he correctly predicted the U.S. housing market crash in 2008, and is often touted as the “Big Short” investor.

Despite their diverse backgrounds, Buffett, Gates and Burry have several similar investment choices. But the one that stands out the most is farmland. While this seemingly orthodox investment choice has turned heads, the inflation- and recession-proof nature of farmland makes it one of the best assets to hedge portfolio risk. Median inflation-adjusted returns on farmlands over the past 50 years stand at 6.1% per year.

As of 2022, inflation-adjusted net farm income was $167.3 billion, according to the U.S. Department of Agriculture.

Despite a 19.8% dip in the stock market during the first quarter of 2020, farmland values experienced only a marginal decline of 0.1%, reflecting its resilience against economic downturns. The downturn during the onset of COVID-19 marked only the second negative quarter for farmland in the past three decades.

Gates And Buffett’s Love For Farmland

Buffett has often preached the benefits of investing in large-cap stocks or bundled index exchange-traded funds (ETFs) rather than opting for relatively riskier small-cap and mid-cap stocks. Buffett’s interest in farmland dates back to his high school years when he bought his first farm in Nebraska for approximately $10,000. His net farmland and agricultural property holdings are estimated at at least 400 acres.

“If you said … for a 1% interest in all the farmland in the United States, pay our group $25 billion, I’ll write you a check this afternoon,” Buffett said during Berkshire Hathaway Inc.’s 2022 annual shareholder meeting. “[For] $25 billion I now own 1% of the farmland. [If] you offer me 1% of all the apartment houses in the country and you want another $25 billion, I’ll write you a check, it’s very simple.

“The apartments are going to produce rent and the farms are going to produce food.”

Gates owns 270,000 acres of farmland across the United States, making him the largest private land owner in the country. While Gates’ portfolio accounts for 1/4000 of all farmland in the U.S., his sizable ownership raised concerns regarding monopolistic practices and price gouging.

However, Gates defended his ownership, stating, “I have invested in these farms to make them more productive and create more jobs. There isn’t some grand scheme involved — in fact, all these decisions are made by a professional investment team.”

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Burry has focused on acquiring agricultural land with adequate water sources.

“I believe that agricultural land — productive agricultural land with water on site — will be very valuable in the future. I’ve put a good amount of money into that,” Burry said. “I’m interested in finding investments that aren’t just simply going to float up and down the market. The incredible correlation that we’re experiencing — we’ve been experiencing for a number of years — is problematic.”

While the value of the housing market keeps fluctuating, the price of farmland is expected to keep growing because of its inelastic nature. Given macroeconomic headwinds, including food insecurity amid the prolonged Russia-Ukraine war, domestic agricultural farmlands are expected to remain in demand.