It has been a long time coming, but this month is when billionaire investor Warren Buffett is due to step down from day-to-day leadership of Berkshire Hathaway.
In recent years, Buffett has been selling some of his firm’s stake in Apple even though the stock has been performing well. Berkshire has been sitting on a gargantuan cash pile, but has failed to land the sort of large acquisition that would leave a serious dent in its money.
Could it be that, as Warren Buffett prepares to retire, the world has changed around him and his approach to investing is less relevant than it once was?
Time-proven strategy
I do not think so.
It is true the world has changed around Buffett. That is inevitable given that he has spent decades in the investment arena.
But I think the Warren Buffett way of investing remains as relevant as ever.
In fact, I remember that many of the same questions we have heard about Warren Buffett over the past several years as AI-related stocks have soared were also posed during the dotcom boom just over a quarter of a century ago. Buffett was then sitting on his hands (and cash) rather than getting swept up in the market mania.
In the long run, that now looks like it was a very wise decision. Indeed it meant Buffett had dry powder a few years later, when the financial crisis came along.
Buffett’s approach then was the same as it had been for decades – and is now.
He aims to buy into what he sees as great businesses when he can buy their shares at an attractive price.
On the hunt for bargains
How well that works depends on a few things.
Buffett has spare money to invest. He is willing to be patient. He takes time to dig into the details of any business in which he may invest.
I think that approach makes sense – and see no reason why it could not be as successful today and in future as it has been over many decades already for the Sage of Omaha.
One share to consider
Based on such an approach, one share I think investors should consider today is British American Tobacco (LSE: BATS).
Warren Buffett has long been a fan of premium brands that give a company pricing power. British American owns brands including Lucky Strike and Pall Mall.
The basic economics of the company are strong. Cigarettes are cheap to make but can command a high price, meaning profit margins are attractive.
Thanks to a large pool of smokers, demand is substantial.
However, cigarette smoking is declining in many markets. That poses a risk to revenues and profits for British American Tobacco.
Still, the cigarette market although declining remains substantial. British American’s free cash flows have enabled it to raise its dividend per share annually for decades. Its current dividend yield is 5.5%. The company has also been developing its non-cigarette business, for example by expanding into vapes.
