The Most Direct Way to Invest Like Warren Buffett
Whenever Warren Buffett breaks down his approach to , he makes it sound deceptively simple. The strategy? Just buy a great company at a reasonable price and hold on to it for the next half-century. Looking back, it seems obvious that a company like Coca-Cola was destined for success. But honestly, how many of us have held that stock since 1988, when Buffett made his move?
Hindsight is a beautiful thing, but when it comes to , we’re forced to bet on the future. And trying to invest like Buffett is tough. It requires identifying companies that will not only survive but thrive for the next 20 years, all while making sure you don’t overpay. That’s a tall order. Even Buffett himself admits to making mistakes, like when he acknowledged paying too much for Kraft-Heinz.
That said, there’s a surprisingly straightforward way for those interested in like him: just copy his moves.
Mirroring the Master
You can find a complete list of every stock Buffett owns by looking up the latest annual letter from Berkshire Hathaway. In the 2018 letter, for example, the list appears on page 12. It includes household names like:
- American Express (AXP)
- Apple (AAPL)
- Bank of America (BAC)
- The Coca-Cola Company (KO)
- Goldman Sachs (GS)
- JPMorgan Chase (JPM)
- Southwest Airlines (LUV)
- Wells Fargo (WFC)
One of the most useful details in this report is the “cost” of each holding and the “number of shares.” With a little quick math, you can figure out the average price Buffett paid. Since he’s held many of these positions for years, you likely won’t be able to buy them at his price. However, every so often, one of his newer picks might dip below his purchase price, giving you a rare chance to get in for even less than he did.
Another approach is to simply buy a collection of the stocks he owns. You can hold them and only sell when news breaks that Buffett has exited his position. But perhaps the easiest route for anyone interested in is to buy B-shares of Berkshire Hathaway (BRK-B). For around $203 (at the time of the original writing), you get to own a piece of the company and let Buffett, Charlie Munger, and their successors handle the hard work of .
The Real Lesson from Buffett's Playbook
If you follow Buffett long enough, you start to see clear patterns. He gravitates toward powerful, established brands like Coca-Cola and Apple. He also has a significant appetite for financial companies such as Bank of America and Wells Fargo. These firms are highly leveraged, which means they generate massive profits in good economic times—and often get government support during downturns.
It’s also critical to understand that Buffett isn’t just some folksy investor. He’s the ultimate insider. When Goldman Sachs offered preferred shares with a 10% coupon, he was the one who got the phone call, not the average person. This reality shapes his opportunities.
Still, there's one core principle from his style that everyone can apply, and it's the key to all about. You need to own businesses with strong . This is the ability to increase prices without sending customers running to a competitor. When Coke adds a dime to the price of a can, you probably don’t think twice. But if your local gas station is ten cents more expensive than the one across the street, you’re likely driving over to the competition.
Building wealth by owning a business in a fiercely competitive market is incredibly difficult. If you’re selling a commodity like corn, oil, or generic clothing, your profit margins are paper-thin. In contrast, a strong brand or a unique product gives you a buffer from competition and allows for healthier margins. There’s only one place to get an Apple laptop or Nike sneakers, and that’s why they can command premium prices. It's a foundational concept for anyone treating for long-term growth.
Buffett summed it up perfectly:
The single most important decision in evaluating a business is pricing power. If you've got the power to raise prices without losing business to a competitor, you've got a very good business. And if you have to have a prayer session before raising the price by 10 percent, then you've got a terrible business.
This single idea is more valuable than any hot stock tip and is a timeless lesson for anyone looking at as a path to financial independence—a key part of many long-term plans for those with goals of joining the ranks of .
