If he had $1m today, here’s how this Warren Buffett disciple would build wealth

This Warren Buffett-influenced fund manager reckons small-cap stocks are the way to go for risk-tolerant investors starting out.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

A pastel colored growing graph with rising rocket.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Warren Buffett has many disciples in the global investing community. That’s hardly surprising, given that the billionaire super-investor has essentially laid down a blueprint for people to follow to build wealth.

One interesting Buffett-influenced investor is fund manager Guy Spier. In 2008, he participated in a $650,100 charity lunch with the Oracle of Omaha.

In his book, The Education of a Value Investor, Spier frequently references Buffett as a central influence. However, in a recent podcast, he shared how his investment approach would differ if he were starting out in his 30s with ‘just’ $1m.

Should you invest £1,000 in Greggs Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Greggs Plc made the list?

See the 6 stocks

Here’s what he said.

Taking some risk

Now, to be clear, Spier manages more than $280m in his fund. He’s worth quite a bit. Therefore, $1m to him might be the equivalent of, say, £10,000 to a retail investor like myself.

Indeed, I’m trying to build towards a £1m (or $1.2m) portfolio, rather than starting off with that amount!

Nevertheless, the same principle applies, as it’s about growing a modest amount of money (relatively speaking) into something much larger.

Spier sensibly says that he would have living expenses covered and debt paid off before starting. That way, all focus can be on preserving and growing the portfolio through compounding rather than needing to draw upon it to survive.

With that sorted, he says he would want to take higher risks. Specifically, he would divide that sum into at least 10 shares. While they wouldn’t be too speculative so as to risk losing all the invested capital, each one would still “have a high enough probability of returning multiples of my money“.

Spier mentions making a couple of investments a year, with the aim of sevenfold returns from some over a five-year period.

Which type of stocks?

The fund manager says he would generally look at companies with a market cap under $1bn (£800m). Due to their smaller size, these have a better chance of becoming multibaggers, at least in theory.

Interestingly, Spier cites AIM companies listed in London as a place where he might look. These tend to be smaller enterprises, making AIM fertile waters to fish in for opportunities.

One I like

I agree with the general theme here. One AIM stock I hold is hVIVO (LSE: HVO), which has a market cap of just £133m.

This is a fast-growing contract research organisation specialising in testing infectious and respiratory disease vaccines and therapeutics through human challenge trials. These are where volunteers are exposed to pathogens in a controlled environment. hVIVO works with global pharmaceutical firms.

The share price has struggled lately, falling 33% in the past six months. This weakness appears related to the election of Donald Trump and concerns that vaccine research might be deprioritised, leading to fewer sales opportunities. This is a potential risk here.

Created with Highcharts 11.4.3hVIVO Plc PriceZoom1M3M6MYTD1Y5Y10YALL26 Jan 202026 Jan 2025Zoom ▾Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '24Jan '2520212021202220222023202320242024www.fool.co.uk

However, in December, hVIVO signed an £11.5m contract with a top-tier global pharma client, then this week inked a £3.2m project, its largest standalone lab contract signed to date.

Meanwhile, the profitable company has reiterated its confidence in reaching £100m in revenue by 2028, up from £62m last year. And the best bit here is the valuation, with the stock trading at just 11.7 times this year’s forecast earnings.

From 19p, I reckon it could generate very nice returns.

AI Revolution Awaits: Uncover Top Stock Picks for Massive Potential Gains!

Buckle up because we're about to dive headfirst into the electrifying world of AI.

Imagine this: you make a single savvy investment in some cutting-edge technology, then kick back and watch as it revolutionises entire industries and potentially even lines your pockets.

If the mere thought of riding this AI wave excites you and the prospect of massive potential returns gets your pulse racing, then you’ve got to check out this Motley Fool Share Advisor report – 'AI Front Runners: 3 Surprising Stocks Riding The AI Wave’!

And here’s the kicker – we’re giving you an exclusive peek at ONE of these top AI stock picks, absolutely free! How’s that for a bit of brilliance?

Get your free AI stock pick

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.

Ben McPoland has positions in hVIVO Plc. The Motley Fool UK has no position in any of the shares mentioned. 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.

More on Investing Articles

Investing Articles

Up 30% in weeks, does the BAE Systems share price still offer value?

The BAE Systems share price has been on a tear over the past couple of months. This writer sees limited…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Hunting for shares to buy as the market trembles? Remember this!

After a choppy week in global stock markets, our writer goes back to basics in his hunt for bargain shares…

Read more »

Investing Articles

3 simple principles to help build wealth in an ISA

As a new tax year opens up new ISA allowances for many investors, our writer shares a trio of things…

Read more »

Investing Articles

US trade tariffs: what they could mean for UK shares like Ashtead, Compass Group, and Experian

US trade tariffs continue to rock global markets, and the UK is no exception. Our writer considers how a new…

Read more »

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Dividend Shares

The Trump slump has smashed these FTSE 100 shares!

After a rough week for US and UK shares, investors have been shaken. But now these FTSE 100 stocks have…

Read more »

Investing Articles

£10,000 invested in Rolls-Royce shares 5 years ago is now worth…

Rolls-Royce shares have been on fire since April 2020. Part of this is the result of pandemic restrictions lifting, but…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

£10,000 invested in Tesla stock at its peak in 2024 is now worth…

Over the last few months, Tesla stock has lost nearly half its value. Here, Edward Sheldon explores a few takeaways…

Read more »

Investing Articles

Is the S&P 500 heading for an epic stock market crash?

Our writer shares his thoughts on a very crazy time for the S&P 500 and the wider stock market. How…

Read more »