The way you might play Call of Duty, Warren Buffett plays the investing game.
In the professional league, to be precise.
Today, I’m sharing his secrets and strategies.
Warren Buffett’s real wealth
When people say Warren Buffett is worth $140 billion, that doesn’t mean he has that sum sitting in a bank account.
Most of it comes from his stake in Berkshire Hathaway, of which he owns around 15%.
But what exactly is Berkshire Hathaway?
It’s a holding company, meaning a company that owns or invests in other businesses.
Unlike a conventional investment fund, it does more than manage a portfolio of shares.
Let me keep it simple:
Berkshire Hathaway fully owns businesses such as Duracell, the battery company, and clothing company Fruit of the Loom.
It also invests in businesses you probably know, such as Coca-Cola and Bank of America.
Warren Buffett’s role
Warren Buffett has been Berkshire Hathaway’s CEO since 1965.
His job?
Run the company and make strategic, operational and financial decisions to maximise the value of its shares.
In practice, he:
- Buys shares in other companies on Berkshire’s behalf
- Buys entire businesses to add to Berkshire’s portfolio
He hasn’t done it alone: Charlie Munger was always by his side, as his right-hand man and strategic adviser.
Why do investors trust him?
Shareholders invest in Berkshire Hathaway because they trust Warren Buffett’s management and long-term vision. Charlie Munger’s too, of course.
They haven’t been disappointed: Berkshire Hathaway has outperformed the market, including the S&P 500, over several decades.
Warren Buffett’s strategy
Now you understand where his wealth comes from, let’s look at his secrets and strategies.
Love the game
Warren Buffett loves what he does.
So much that he spends his days reading books and financial statements.
Personally, after reading one set of accounts, all I want is to do something else.
But there’s more.
Let me ask you something:
Would you still work if you knew you had to give all your money away at the end?
That’s what Warren Buffett has committed to doing.
99% of his fortune will go to philanthropic causes.
And he keeps playing the game anyway.
Find good businesses
One reason Buffett spends so much time reading financial statements is to find good businesses.
He looks for a durable competitive advantage.
To explain it, he often uses the metaphor of a castle with a moat.
A castle surrounded by a moat is harder to attack and conquer than an undefended one.
He looks for businesses with those "moats".
In other words, advantages competitors can’t easily copy.
The perfect example?
Coca-Cola, with its globally recognised brand.
Invest in what he knows
Buffett has a simple rule: only invest in sectors he understands.
He avoids areas he doesn’t know well, such as cryptocurrencies.
That’s why Berkshire Hathaway’s portfolio is mainly made up of traditional businesses and established services.
Wait for the right opportunity
Finding good companies isn’t enough. Buffett also waits for the right time to invest.
He never rushes and stays patient.
He keeps large amounts of cash available so he can act when opportunities arise.
He calls it "finding bargains": buying businesses for less than their true value.