Even with a portfolio as robust as Berkshire Hathaway’s, which totals over $370 billion, Buffett reminisces about the days when managing less money offered a “huge structural advantage.”
His early success in the 1950s, where he significantly outperformed the Dow, is a testament to the nimble and potent potential of smaller investment operations. “The highest rates of return I’ve ever achieved were in the 1950s… I killed the Dow. You ought to see the numbers,” Buffett recalled in a Bloomberg Businessweek interview back in 1999.
Fast forward to 2024, and Buffett’s advice remains grounded in a profound simplicity. At this year’s Berkshire annual shareholders meeting, when queried about how he’d achieve a 50% return today, Buffett pointed to a method rooted in meticulous research rather than modern complexities: “The answer would be, in my particular case, it would be going through the 20,000 pages [of Moody’s Manual],” he declared.
Moody’s Manual: Buffett’s Blueprint for Success
Moody’s Manual, a series of detailed publications about publicly traded stocks, was Buffett’s resource of choice during his formative years as an investor. He credits his deep dives into these texts with building a foundational understanding of various industries and companies, particularly lesser-known entities that offered unique opportunities. “I found all kinds of interesting things when I was 20 or 21,” Buffett shared, underscoring the value of thorough research in achieving exceptional returns.
For modern investors, Moody’s Manual lives on as Mergent Manuals after Mergent, Inc. acquired Moody’s Financial Information Services in 1998. Yet, the spirit of Buffett’s approach extends beyond these specific texts to a broader philosophy of exhaustive sector knowledge and an opportunistic mindset.
Embracing Technology and Tools of Today
While the essence of Warren Buffett’s strategy remains unchanged, the tools and resources at the disposal of today’s investors have evolved. Platforms like Yahoo Finance and Google Finance offer real-time stock quotes, financial news, and comprehensive data on thousands of companies. Additionally, the EDGAR database from the U.S. Securities and Exchange Commission provides detailed filings and reports, allowing for the kind of thorough research Buffett advocates.
A Passion for Investing, Not Just Profits
One crucial element of Warren Buffett’s methodology is the love for the process. “With $1 million, you could earn 50% a year, but you have to be in love with the subject. You can’t just be in love with the money,” Buffett advised. His passion for investing is a core component of his success, a sentiment he believes is necessary for anyone looking to replicate his achievements on a smaller scale.
Despite his enthusiasm for stock picking, Buffett is pragmatic about the average investor’s capabilities. At Berkshire Hathaway’s 2021 shareholders meeting, he expressed doubt about the average person’s ability to pick stocks successfully, recommending instead a low-cost S&P 500 index fund for most. His will echoes this philosophy, advising trustees to invest 90% of his wife’s inheritance into such a fund.
Warren Buffett’s Investment Lessons
Warren Buffett’s journey offers valuable lessons for both budding and seasoned investors. His blend of profound simplicity in investment strategy, a deep love for the craft, and the wise utilization of available tools provides a roadmap that’s as educational as it is inspiring. For those looking to make their mark in the investing world, perhaps the best starting point is where Buffett began—with a page and a passion.
