Buffett's Legacy

It would be remiss of us to not discuss Warren Buffett in the week that he announced his retirement.

Buffett’s success is not a surprise. Given there are thousands of fund managers, one of them has to be a roaring success. What makes Buffett unique is his success of an extended period of time. Buffett has reigned supreme for around 70 years. He has always been obsessed with money and if you want to read about his life check out The Snowball by Alice Schroder. It’s about 800 pages but well worth it.

So how has Buffett being so successful?

There is nothing new under the sun. Buffett simply used sound principles to outperform.

Experienced investors tend to simplicity because they don’t strive for perfection - they don’t seek to get in at the exact bottom nor sell at the exact top. They have seen lots of cycles and come to the conclusion that despite all the chatter and hype, the world pretty much stays the same in the broader picture.

Stock markets go up and down.

One of Buffett’s true advantages over other investors was an ability to stay calm and realise that most things don’t change and if you wait patiently for when stocks go on sale then you will do well.

Buffett has been successful by selecting those companies that have what he calls a moat - some sort of advantage that allows the company to dominate a sector repelling all competition. Think Coke or more recently Apple. And then waiting patiently until they become cheap in regard to their intrinsic value.

Throughout his tenure the fundamentals of an economy have and will always remain the same. Regardless of the product there are a small number of companies that last a lifetime and most that don’t.

Buffett found a formula or a set of principles that worked over time. And he was wise enough to understand that if you have a winning formula, you can simply wait for those times to maximise the formula’s success.