Why Buffett's Investment Success is Hard to Copy

How did Warren Buffett's simple, safe investment approach prove so successful? His approach has turned many financial models upside down

John Rekenthaler 12 February, 2019 | 7:19AM

Warren Buffett

Looking last week at the secrets of Warren Buffett’s success, one mystery remains: the winning formula for Warren Buffett’s equity selection. The Oracle of Omaha is known to play it safe: Berkshire Hathaway’s (BRK.A) companies have been of high quality, consistently profitable, with high cash flows and low debt. Consequently, their stock prices have been relatively stable. 

That doesn’t square with posting record gains during a prolonged bull market. Assuming more risk does not necessarily lead to higher returns, particularly during sell-offs, but it certainly should apply when stocks perform well over the very long haul, as they have during Buffett’s tenure at Berkshire. With Buffett’s equity portfolio, the usual rules of risk and return have been inverted. 

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Berkshire Hathaway Inc A277,035.00 USD-0.52

About Author

John Rekenthaler

John Rekenthaler  is vice president of research for Morningstar.

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