Warren Buffett Detailed A 'Disgusting' Investing Mistake He Was Making For Years: 'Soggy, One-Puff' Stocks Don't Make You Rich

Warren Buffett has made plenty of winning moves, but he's conscionable arsenic speedy to telephone retired his missteps. One of his biggest? Wasting years chasing dirt-cheap stocks that weren't really worthy owning.

For a agelong time, Buffett followed the "cigar butt" strategy—buying stocks that were inexpensive simply due to the fact that they were cheap. As helium explained successful a 2001 code astatine the University of Georgia:

"You locomotion down the thoroughfare and you're looking astir for cigar butts, and you find connected the thoroughfare this terrible-looking, soggy, ugly-looking cigar—one puff near successful it. But you prime it up and you get your 1 puff. Disgusting, you propulsion it away, but it's free. I mean it's cheap. And past you look astir for different soggy one-puff cigarette."

That was his investing mindset for years. And sure, you tin marque immoderate wealth doing it. But arsenic Buffett enactment it, "It's truthful overmuch easier conscionable to bargain fantastic businesses."

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One of Buffett's worst purchases was Berkshire Hathaway (NYSE:BRK, BRK.B)) itself. In the aboriginal days, it was thing much than a struggling textile business that happened to beryllium trading beneath its moving superior per share.

He explained: "You got the plants for nothing, you got the machinery for nothing, you got the inventory and receivables astatine a discount. It was cheap, truthful I bought it."

Sounds similar a steal, right? Except 20 years later, helium was inactive stuck moving a atrocious concern that wasn't compounding his money.

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Buffett continued, "Time is the person of the fantastic business. You support compounding, it keeps doing much business, and you support making much money. Time is the force of the lousy business."

That's the existent contented with atrocious businesses. Even if you get them astatine a bargain, they don't turn into thing valuable.

Buffett yet abandoned his bargain-hunting obsession and started focusing connected quality. Instead of buying stocks conscionable due to the fact that they were cheap, helium looked for companies with beardown fundamentals—businesses that could turn and multiply his concern implicit time.