Here’s how I’m following Warren Buffett to pick my best shares to buy

Never mind all those get-rich-quick punters out there, Warren Buffett has done it slowly, and made his shareholders very rich indeed.

Fans of Warren Buffett taking his photo

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The best shares to buy are those with the lowest prices, and the best chance of making me rich quick, right? Well, billionaire investor Warren Buffett would not agree.

Since he took charge at investing firm Berkshire Hathaway in 1965, he’s made an average annual return of 20% for his shareholders. And he didn’t buy any get-rich-quick stocks.

No, he bought what he understands, at prices he found attractive, and held for the long term.

That 20% per year is enough to turn £10,000 into £380,000 in 20 years. Getting rich slowly looks pretty good when we see it like that, doesn’t it?

Best shares to buy?

So how can I use Warren Buffett’s approach to get me the best long-term returns?

I think step number one is to forget about looking for the cheapest companies. Instead, I should look for the best companies. Those I understand, and I’d want to hold for at least 10 years.

There’s a quote from Buffett that I often roll out, and I make no apologies for repeating it again: “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”


So, I think I should first ignore share prices, valuations, and all that stuff.

I need to narrow down the whole list of stocks to only the wonderful ones. And maybe start by picking what I think are the most wonderful sectors.

After buying shares in Gillette, Buffett said he liked waking up every morning and thinking about all the chins being shaved.

I’ve always liked the banking business (and so has Warren Buffett).

I like to wake up and think that every person and business needs their bank. It’s why I bought Lloyds Banking Group shares.


Banking is a global essential, as is housing. And guess what?

In the UK, we have a chronic, housing shortage. And also the biggest property slowdown in years.

Building houses has to be a wonderful business, don’t you think? I do. And the falls in stock prices across the sector make many of them look more than fair to me.

Yes, I’m coming to prices and valuation, but I have to do the other stuff before I decide. No stock is so good it’s worth buying at any price.


There are plenty more with essential goods and services. Supermarkets and consumer goods come to mind, though they’re very competitive.

Why not look for those with good defensive moats? I’m thinking of something like National Grid, one of the FTSE 100‘s steadiest dividend payers.

Back to finance, I’m a big fan insurance too. Oh, so is Warren Buffett.

It can be a volatile sector. But over the long term, it can be a nice cash cow. The big firms also look defensive to me, with new entrants very unlikely to unseat them.

I bought Aviva shares, and they’re paying big dividends. I like others in the sector too.


I’ve picked on some of my favourite sectors here. I think we should all do the same, and need to understand the risks of our own choices.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft has positions in Aviva Plc and Lloyds Banking Group Plc. The Motley Fool UK has recommended Lloyds Banking Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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