You Can Easily Duplicate Warren Buffett's Best Investment Tactic

Reuben Gregg Brewer, The Motley Fool

Mon, Mar 10, 2025, 3:30 AM 5 min read

Warren Buffett is 1 of the astir celebrated investors of each time. Indeed, the institution helium runs, Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B), is much similar a communal money than a accepted corporation. While helium doesn't speech astir his investments oregon his concern attack precise often, the antheral known arsenic the Oracle of Omaha does supply immoderate insights erstwhile helium pens his company's yearly shareholder letter.

In 2024, helium pointed retired what mightiness beryllium 1 of the biggest tactics helium employs to physique wealth. Here's what it is.

To afloat recognize wherefore Wall Street holds Warren Buffett successful specified precocious respect truly requires you to recognize Berkshire Hathaway. Buffett is the CEO of that company, which is often lumped into the concern sector. But that's not a large acceptable because, successful reality, Berkshire Hathaway is simply a elephantine conglomerate. Even that isn't capable to picture the company, though.

Most companies bash 1 thing. Conglomerates usually bash a fewer akin things. Berkshire Hathaway's concern spans aggregate industries. For example, Berkshire Hathaway has subsidiaries that merchantability furniture, cars, and houses. Other subsidiaries marque products similar paint, chemicals, manufactured houses, and specialty parts. Still different businesses run utilities, trains, and pipelines. While astir companies tin summarize their concern successful a fewer paragraphs, the concern statement for Berkshire Hathaway runs 23 pages agelong successful its yearly 10-K.

The eclectic constitution of the company's concern is straight related to the mode successful which Warren Buffett invests. He likes to bargain bully companies, either successful full oregon successful part, erstwhile they look attractively priced. The adjacent step, however, could beryllium the astir important one, and Buffett highlighted it specifically successful the company's 2024 yearly report.

There are truly 2 concern portfolios wrong Berkshire Hathaway. One is filled with nationalist stocks that the institution tin easy bargain and sell. The different is filled with the companies Berkshire Hathaway owns directly, which are controlled businesses. In 2024, a batch of media highlighted the income Berkshire Hathaway made wrong its nationalist portfolio. But successful the company's yearly report, Buffett made definite to item that these income were really beauteous minimal if you look astatine the full portfolio of controlled and nationalist companies wrong Berkshire Hathaway.

There's 1 enactment that deserves overmuch much attraction than the banal sales: "In reality, Berkshire astir ne'er sells controlled businesses unless we look what we judge to beryllium unending problems." The absorbing happening astir that connection is that it could beryllium taken to connote that Berkshire is actively trading its nationalist banal portfolio each the time. But that simply isn't true. Buffett has a halfway portfolio of nationalist stocks that are seldom traded, including specified iconic names arsenic Coca-Cola (NYSE: KO) and American Express (NYSE: AXP).