Warren Buffett: Here’s how to invest like the Berkshire Hathaway CEO

Warren Buffett, Berkshire Hathaway (BRK-A) CEO, is a legendary investor and business magnate who is widely regarded as one of the most successful investors in history. With a net worth of more than $100 billion, recent stock purchases over the last 15 years have helped Buffett’s wealth massively increase.

So what exactly is his investment philosophy? It’s centered around the principle of value investing, which involves finding undervalued companies that focus on long-term earnings rather than short-term growth.

In other words, rather than buying stocks, he buys businesses that have a competitive advantage. This approach has made him one of the most successful investors in history, and anyone can invest like him by following his strategies.

Yahoo Finance's Josh Schafer zeroes in on the big companies Warren Buffett invests in, including Costco (COST) and Coca-Cola (KO), and breaks down why his investment strategy works, but also, can sometimes cause him to miss out on some big winners.

Video transcript

JOSH SCHAFER: No fear of missing out and sometimes just being plain boring, it's what made Warren Buffett one of the most successful investors in history. In fact, anyone can invest like Warren Buffett. His strategy is centered around the principle of value investing, finding companies that are undervalued, focusing on long-term earnings, not short-term growth. In other words, buy businesses, not stocks.

WARREN BUFFETT: If we buy a business, we're going to hold it forever. So we're going to have good years, bad years, in-between years, maybe a disastrous year some year. And we care a lot about the price. We do not care about the next 12 months.

JOSH SCHAFER: Batteries and paint, not sexy companies, but guess who owns Duracell and Benjamin Moore? Buffett's Berkshire Hathaway. Buffett invests in companies that have a competitive advantage, or a moat, as he puts it. It's what led him to invest in Apple, his biggest holding.

WARREN BUFFETT: I just think of basically the utility of those products to a ecosystem that is demographically terrific and finds that instrument useful dozens and dozens of times a day. It's almost indispensable, not only the individual's business. I mean everything.

JOSH SCHAFER: Buffett also invests in companies that are easy to analyze. He knew the value of the membership subscription model long before Amazon Prime or Netflix. Berkshire has held Costco for decades.

Buffett says he buys what he knows, which is why Berkshire is the largest shareholder in Coca-Cola and Kraft Heinz.

Does his approach cause him to miss a few big winners? Sure. He passed on Tesla and Google and was very late to Apple and Amazon.

WARREN BUFFETT: The fact that you're missing out on 90% of the stuff doesn't really make any difference if the 10% you do is right.

JOSH SCHAFER: He's always had a penchant for banks and insurance companies. Berkshire Hathaway owns Geico and has stakes in Citi, Visa, and American Express.

To invest like Buffett, buy what you know. Buy a business, not a stock. Don't be afraid to be boring, and be patient.