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Warren Buffett explains how to replicate his success and achieve a 50% annual return

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When Warren Buffett was starting out with little money seven decades ago, he achieved his best return on a percentage basis. He once vowed that he could easily produce a 50% annual return if he was only managing $1 million, emphasizing the advantage of not having a lot of money to invest. As Berkshire Hathaway’s equity portfolio grew to over $300 billion, it became increasingly difficult for Buffett to find attractive investment opportunities. Despite this, he detailed how he would achieve the same impressive returns if he were starting out today at Berkshire’s recent annual meeting.

Buffett’s success in investing can be attributed to his early strategy of buying cheap stocks, often troubled companies at deep discounts. He developed a knack for picking undervalued investments, comparing them to picking up discarded cigar butts with a puff remaining. As he evolved in his career, influenced by Charlie Munger, Buffett shifted his focus towards buying quality companies with a competitive edge at fair prices. This transition led to the creation of an empire comprising first-class businesses like Geico insurance, BNSF Railway, Dairy Queen, and energy and manufacturing companies.

The key to Buffett’s success lies in his advice to find a subject one is passionate about, become an expert in that subject, and invest accordingly. He emphasized the importance of being in love with the subject rather than just being in love with the money. Buffett’s approach involved in-depth research and analysis, as seen in his early days of poring over Moody’s Manual to find buying opportunities in the railroad industry. This dedication to knowledge and expertise allowed him to spot unusual investments that could lead to outsized returns.

Buffett’s investment philosophy is rooted in the principles of value investing taught to him by Benjamin Graham, the father of value investing. He stressed the importance of identifying undervalued assets with the potential for long-term growth, rather than following market trends or chasing short-term gains. By focusing on buying quality companies at fair prices, Buffett was able to build a successful investment portfolio over the years.

In conclusion, Warren Buffett’s success as an investor can be attributed to his early strategies of picking undervalued stocks and his transition towards buying quality companies. His advice to investors is to find a subject they are passionate about, become an expert in that subject, and invest with dedication and commitment. By following his approach of thorough research, long-term thinking, and disciplined investing, individuals can potentially achieve success in the world of investing, as Warren Buffett has demonstrated over the years.

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