Would you take investment advice from a 92-year-old guy who drinks a lot of cherry Coca-Cola, was rejected by Harvard Business School and didn’t buy a smartphone until 2020?

You would if that guy was Warren Buffett, one of the richest people in the world and the legendary chairman and CEO of the Omaha-based Berkshire Hathaway, a conglomerate that owns dozens of businesses. It’s hard to believe, but until recently, a younger generation of small investors had dismissed ­Buffett as washed up and out of touch in today’s world of mobile trading apps, meme stocks, cryptocurrencies and social-media investment gurus touting shortcuts to wealth.

But then the world and the global economy changed dramatically. This new era of higher interest rates and above-target inflation suddenly favors the kind of high-quality value stocks that Buffett has invested in so masterfully for 60 years. Indeed, Berkshire Hathaway stock managed to skirt last year’s bear market with a 4% return, trouncing the S&P 500 index by 25 percentage points.

It’s not just small investors who find Buffett’s strategies and folksy Midwestern wisdom more pertinent than ever. Bottom Line Personal asked five top investment professionals about the lessons and insights they learned from working with Buffett, talking to him and studying more than six decades of his writings and annual shareholder letters.


Buffett Lesson #1: Know when to pivot. Warren is often regarded as an old-­fashioned investor who sticks with what he knows. In fact, he still lives in the same house in Nebraska that he bought at age 27 (shown above). But during moments of sweeping changes in the economy and financial markets, he has shown deft flexibility. Example: For most of his career, Warren famously avoided both technology (because he didn’t understand it) and railroads (because they were too capital-intensive). But when the railroad industry improved its efficiencies and became essential to the future of the US economy, Buffett bought Burlington Northern Santa Fe outright for $44 billion in 2009, his biggest acquisition ever. And as mature tech companies turned into profitable cash cows, Warren added Apple to the Berkshire Hathaway investment portfolio in 2016.

How to use this lesson: No matter how much success you have or how comfortable you are with your investment strategy, be open to adapting. I’m in my mid-60s now, but because the macroeconomic world has seen such seismic shifts, I’ve moved into areas of the market that I had ignored in the past. Examples: We’ve entered a period of heightened inflation and restricted global oil supplies that is likely to persist for years, so I’m buying in the energy sector because I see some energy companies’ share prices lagging behind the profitability that higher oil prices will ignite. We’ve also reached an inflection point in this country for 72 million members of the Millennial generation—they have entered their prime home-buying years, which is going to provide long-term tailwinds for the home-builder stocks that I own.


Buffett Lesson #2: You can’t produce a baby in one month by getting nine women pregnant. Warren has often used this line to stress that investors should maintain a long-term perspective in the face of stock market volatility. For the past decade, I’ve taught an executive course at University of Nebraska at Omaha. My students are smart, sophisticated individuals, but the concept they struggle with the most is confusing a company’s market value with its intrinsic value. Market value is the price that other people are willing to pay for an asset at a given time. Intrinsic value is what you know the company is really worth based on your analysis of its financial performance and estimates of how it will perform in the future.

Perhaps you thought you fared badly in 2022’s bear market—but the investment portfolio of stocks and bonds that Buffett oversees for Berkshire Hathaway actually declined $53.6 billion on paper. Warren is unfazed by these unrealized losses—he accepts that efficient markets exist only in textbooks and that the behavior of stocks can be baffling, often trading at foolishly high and low prices.

How to use this lesson: It’s easier to be patient and avoid panic when you realize that market volatility is not the same as the risk for permanent loss of capital. Start by doing all you can to minimize that risk. Buy wonderful companies for less than you think they are worth. Then, when a bear market hits, instead of obsessively checking your stocks’ prices, use your time and energy more productively—revisit your assumptions about the long-term value of the companies you own to check if anything has changed. Like Buffett, you want to sell only if the future potential of the company no longer looks attractive or if you have identified another stock more deserving of your capital.


Buffett Lesson #3: Management integrity matters as much as balance sheets. In 1996, Berkshire Hathaway announced it was issuing lower-priced B shares for small investors. I was a portfolio manager at a bank trust company in Kansas City. Berkshire had a market cap of about $40 billion back then, and I wasn’t familiar with Warren, so I didn’t pay much attention. But my father-in-law, a banker in Omaha, suggested I look into the stock offering. Something jumped out of the prospectus at me immediately. The front page of the offering document said something along the lines of, “Mr. Buffett would not buy shares at the current price, nor would he recommend his family and friends do so.” The prospectus went on to point out that Berkshire’s growth would not increase in the future at a rate anywhere near its historical growth and that there even might be substantial periods of underperformance.

I couldn’t believe what I was reading. Who tells prospective investors the unvarnished truth?!? Until that moment, I had been a classic value investor, judging businesses by looking at price-to-earnings ratios (P/Es), book value, free cash flow and dividend yields. Warren taught me to add another factor in my investment research—the company’s corporate culture. He has a pretty simple litmus test for corporate behavior. He once said, “If you would be comfortable having your actions described in detail on the front page of your local newspaper, where your family and friends will read it, go ahead and do it.”

How to use this lesson: There are plenty of clues to good governance when you research a company. Are the top executives compensating themselves egregiously? Does the CEO communicate in plain English to shareholders and give them a full accounting of the company’s operations and finances without burying bad news? Do management and the board of directors put ethics before profits? Does management encourage a “speak-up” culture in which managers can notify a CEO about potential misdeeds? Good corporate governance doesn’t guarantee superior performance, but it can help you avoid investing in companies that may be vulnerable to overstated profitability, aggressive accounting and reputational blowups.


Buffett Lesson #4: Look for snowballs. Let them roll. Warren likes to tell the story of Dutch colonial governor Peter Minuit buying the island of Manhattan in 1626 for $24. Warren says that he would rather have had the money. His reasoning: If that $24 had been invested and earned a 6.5% annualized return for the past four centuries, it would be worth far more than the land value of Manhattan today. His point: The staggering power of compounding from long-term stock investments. Each year, you earn returns not just on your original investment but on all the returns you received in previous years…and you don’t pay taxes on your gains until you sell. I’ve watched Warren achieve the majority of his investment success by making just a dozen truly good investments in compounders such as Coca-Cola and American Express. You only need to get a decent annualized return from a compounder to produce spectacular results over time.

The poster child for compounding is Berkshire Hathaway. From 1965 through 2022, the company shares had returned an annualized 19.9% versus 9.9% for the S&P 500. But if you had invested $10,000 in both over that period, your Berkshire Hathaway shares would be worth $380 million…your index shares, only $2.5 million.

How to use this lesson: For investments that you don’t intend to touch for a long time, you’re better off with steady compounders than sexier, fast-growing businesses. Compounders have long runways for growth, recurring predictable revenue and substantial free cash flow that the company can invest back into the business.


Buffett Lesson #5: Think like a business owner, not an investor. In the 1980s, I entered a training program to become a stockbroker in Baltimore. It was a disaster. I had majored in liberal arts in college, not accounting. Working with stocks felt like a bore, just staring at spreadsheets all day. I was just about ready to quit the program when I was given an assignment to read Berkshire Hathaway’s annual letter to shareholders. Warren didn’t just write about the stocks he owned. He wrote about living, breathing real-world companies with interesting products and people. He regarded investing as part-ownership of a business you were incredibly excited about. Thinking that way provided marvelous clarity for me. I stopped worrying so much about stock and sector movements or forecasting the direction of the economy and interest rates.

How to use this lesson: Focus on company-specific issues—is the growth of the business sustainable?…does the company have an economic moat around it to fend off competitors?…how much more is the company going to be worth five or 10 years from now?

Case study: Apple. I started buying the consumer-tech giant in 2014, two years before it first entered the Berkshire Hathaway portfolio—the only time in my entire career that I out-Buffetted Warren Buffett! Apple earns very high rates of return on capital and has a cult of loyal followers, customers and employees. It’s a top holding for Warren. Skeptics look at Apple’s $2.7 trillion market cap and say the stock has topped out. But they are not thinking of the company as a global business that can sell to four or five billion rising middle-class consumers in the future. Apple’s market cap is still tiny compared to the $70 trillion worth of publicly traded assets in global markets. 

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