How has he done it?

Focus on the facts, not the fears

One element of Buffett’s success has been separating market hysteria from the facts on the ground.

Many people know Buffett invested in American Express (NYSE: AXP) decades ago: Berkshire Hathaway continues to own the shares. Amex seems like a classic Buffett stock market pick. It has a strong brand, proven business model and long-term profit potential.

It also has risks too. Weakening US consumer confidence could lead to higher credit card default rates, hurting profits.

But what fewer people know nowadays is that Buffett bought when one risk was seen as especially notable by the market, which had marked down American Express stock accordingly.

That risk was an accounting fraud involving vegetable oil that affected one of the company’s subsidiaries. Buffett correctly assessed that, as the company was not implicated in the fraud and the financial impact on it was manageable, the share price crash had been overdone. He used it as a buying opportunity.

Quality, always, and without exception

Sometimes though, a market meltdown can make it hard to separate fears from facts. A market fall can become self-fulfilling, weakening formerly strong businesses and then ultimately sending them to oblivion.

That happened to some financial services businesses during the 2007-08 financial crisis. Some were badly run companies but others, arguably, were just in the wrong place at the wrong time.

Such a market crash presented opportunity – but also risk. Buffett’s response was a masterclass in why he became a billionaire.

He was asked to invest in Bear Stearns, then a sizeable investment bank. He spent an evening reading its annual report. He saw enough red flags from that alone to decide he did not need to spend any further time considering the idea.

That’s right: an annual report really can be that useful. For a small investor like me, that in itself is a very valuable lesson from Buffett’s behaviour during the crisis.

But another one is his investment in Goldman Sachs, because it shows how Buffett always prioritises business quality.

Bottom fishing can be dangerous

That sounds simple enough. Who doesn’t like a quality business? The answer is: lots of investors!

In a crash, as share prices plummet, they may think the returns look better from a good business marked down to a rock bottom price, rather than a great business at a merely attractive price.

Buffett has been around long enough to know that quality matters and is worth paying for. Having reasoned that there were opportunities and also risks in the bombed out financial sector in 2008, Buffett looked to sort the wheat from the chaff.

Having dealt with Goldman for over half a century, he invested $5bn on preferential terms and ultimately made billions of dollars in profit.

Just as in calm markets, Buffett was not looking for the cheapest looking share he could buy. He was looking to buy into a great business at an attractive price – and he did.

The post Warren Buffett profited massively from nervous markets. Here’s how! appeared first on The Motley Fool UK.

Partly that is because he is well-known for explaining his approach to investing in clear terms.

But partly it is because Buffett is so good at it.

Next month we should get the latest shareholders’ letter from Berkshire Hathaway summarising last year’s performance, the final one with Buffett at the helm.

But we already know that, in the 60 years from 1964 to 2024, Berkshire’s per-share market value under Warren Buffett’s leadership grew an incredible 5,502,284%.

To put that in context, someone investing $1,000 in Berkshire when Warren Buffett took over would have been sitting on a holding worth around $55bn 60 years later.

How did Buffett manage it?

Buffett had an opinion about what investing is

Lots of people invest – some very well – without really having a point of view on what investing actually is.

Maybe they just put money into shares of companies they like, hoping they will go up in price. As that approach can work, there may seem to be no need for a point of view about what investing actually is.

But Warren Buffett’s success came from his willingness to learn from experience and evolve a thought-out approach over time.

After trying a few investment styles, he landed on the idea that he was buying stakes in companies.

He only wanted to buy stakes in what he thought were great companies. He would aim to do so only at an attractive price (note that that is not necessarily a cheap price) and then hold for the long term.

A focus on quality and long-term investment

Why does this matter?

Having a firm, consistent point of view helped shape what Warren Buffett did and also helped him stay the course.

As an example, consider Berkshire’s holding in American Express (NYSE: AXP).

In the 1960s, the company’s share price was marked down sharply as the market learned of a fraud involving an Amex subsidiary issuing warehouse receipts for non-existent vegetable oils.

Buffett realised that, as American Express was the unknowing victim, not perpetrator, of the fraud and it was not core to Amex’s business, the long-term impact would likely be minimal. American Express had a strong, proven business with a powerful brand and a large customer base.

Warren Buffett’s reasoning was that its underlying value had not really changed. Even allowing for other risks like some cardholders not paying their bills, Buffett scented an opportunity when others were scared.

He calls that “being greedy when others are fearful“.

That turned out to be the correct call. Berkshire bought into a great business at an attractive price – and has hung onto the shares in the decades since.

Compounding gains

Buffett’s remarkable long-term gains have come because Berkshire has kept reinvesting gains.

That is known as compounding.             

Over the course of six decades it can be remarkably powerful. The 5,502,284% gain I mentioned above was ‘just’ 19.9% annually.

That is impressive – but does not sound incredible. By compounding at that rate for decades, though, Buffett delivered really big gains for shareholders.

The post Investor Warren Buffett achieved a 5,502,284% gain in value. Here’s how! appeared first on The Motley Fool UK.

Buffett plans to stay on as chairman. Still though, I think the moment is a good one for investors to reflect on what they might learn from one of the most successful stock market wonders of all time.

Taking the long view

An obvious place to start is timeframe. It is no coincidence that Buffett is retiring only after many decades at the helm. He is a believer in the long-term approach to investing. Indeed, he has said his favourite holding period for a share is “forever”.

Buffett’s approach is simple: if you own a stake in a brilliant company you expect to keep getting better, why sell?

Having an honest view of your skills and limitations

Buffett has been a phenomenally successful investor, but he carries it lightly. One notable thing about him throughout his career is that he has not been arrogant. He remains keen to learn.

Many investors end up falling victim to their own hubris. By contrast, Buffett has tried to stick to what he thinks he understands, while being openly self-critical about his mistakes and misunderstandings. That is not always easy to do!

But, as Buffett’s career demonstrates, it can lead to a level of self-awareness that makes for better investment decisions. That is partly because it helps to avoid some costly bad decisions. As an investor, success is not just about making great decisions – it is also about steering clear of bad ones as much as possible.

Focusing on what creates value

Sometimes, Buffett is characterised as out of touch, or having been suited only to a certain period of recent stock market history. That is because he tends to go for fairly sturdy-seeming businesses, often in long-established industries that can sometimes be far from glamorous.

But I think seeing Buffett in that light misunderstands the man whose Apple stake has created tens of billions of pounds’ worth of value for Berkshire over the past decade.

The reality is that he does not care whether a business is cool or trendy. He does care whether it has a business model that can create sustained long-term value.

Buffett in action

His investment in American Express (NYSE: AXP) demonstrates the point. As befits a man whose favourite holding period is forever, Berkshire has owned this stake for many decades already.

It was acquired after the American Express stock price plummeted. Crucially though, that was not because the business was on the skids. Buffett had liked such turnaround situations earlier in his career (Berkshire was an example, as an ailing US-based textile manufacturer) but changed his approach over time.

Instead, American Express had been dragged down by a broader industry scandal that Buffett – correctly – judged was unlikely to harm the firm’s long-term prospects too much.

Any share has risks. Even today, for example, American Express could see profits fall if a weak US economy leads to higher consumer credit defaults. The automotive loan market is currently providing some concerning signals in that regard.

But Amex has a strong brand, large customer base and proven, profitable business model. Exactly what Buffett likes!

The post With Warren Buffett about to step down, what can investors learn? appeared first on The Motley Fool UK.

That is, in part, because of how he thinks about the market.

Focusing on buying into strong businesses

Stock market prices can move up and down.

For traders who simply want to buy a share then sell it on for a higher price, sudden market moves can be alarming – or exciting.

But Warren Buffett is not a trader. He is an investor.

Buffett’s approach is to try and buy stakes in what he sees as great businesses, when he can do so at an attractive price.

When there is a stock market crash, there can sometimes be a good buying opportunity for shares in the sort of proven blue-chip businesses favoured by Warren Buffett.

Taking the long-term view

Nobody knows what the stock market will do next, though – not even the Sage of Omaha.

Sometimes, a brilliant share can look cheap – only for it to become even cheaper later.

Again, Warren Buffett’s approach can help him here. He ignores the short-term share price movements. Instead, he takes a long-term approach to investing.

By hanging on for the long term, Buffett can ignore concerns about short-term share price falls and instead focus on value creation over the course of years or decades.

An example of the Buffett approach in action

Warren Buffett’s approach can work in a general market downturn. But it has also helped him when a specific share has fallen dramatically due to a nervous market.

For decades, American Express (NYSE: AXP) has been in his portfolio.

Its attractions are obvious: the company has a large customer base, prestigious brand, and proven business model.

But while that may seem obvious now, at some points during its history, many investors have doubted it. That gave Buffett his opportunity.

In 1963 (yes – Buffett really is a long–term investor!), there was a scandal involving salad oil. A broker had fraudulently inflated his claimed inventory. A warehouse company owned by Amex was unwittingly involved.

American Express shares fell by more than half. Buffett swooped in and built a stake in the company. Over the decades since, it has performed brilliantly.

Learning from a master

Of course, things could have turned out differently. Some investors apparently thought the possible reputational damage to American Express was greater than it in fact turned out to be.

There were other risks, of course. An economic downturn can increase defaults and hurt profits for lenders such as American Express. That was a risk in 1963 and it remains a risk today.

But Warren Buffett saw long-term value when American Express shares crashed. He has profited handsomely as a result.

I will use a similar approach when scouring the market for bargains not only when it next crashes, but when it doesn’t. No matter what the wider market may be doing, there can be individual blue-chip bargains lurking within it.

The post Warren Buffett’s done brilliantly in nervous markets. Here’s why! appeared first on The Motley Fool UK.

With the US economic environment looking increasingly uncertain as tariff impacts emerge, and American stock valuations reach new record highs, the risk of renewed volatility appears to be substantial. And while there’s no certainty of a market crash or correction, heeding Buffett’s advice in the current climate might be quite a prudent move.

So what does the ‘Oracle of Omaha’ suggest investors should do in times like these? And how has he applied these tips to his own investment portfolio?

‘Widespread fear is your friend as an investor’

Stock market volatility is an inevitable part of every investment journey. Yet while most investors fear it, Buffett welcomes sudden price swings with open arms. Perhaps the earliest example of this was his investment in American Express (NYSE:AXP) back in the 1960s.

At the time, a company called Allied Crude Vegetable Oil faked its inventory by filling its oil tanks with mostly water and a layer of oil on top. This fooled inspectors for quite some time. But when the fraud was eventually discovered, American Express came under enormous pressure, given that it was its own warehousing subsidiary that issued the receipts saying everything was by the book.

Despite not knowingly participating in the fraud, American Express became exposed to legal liabilities, sending the stock crashing by around 50%.

During all this panic selling, little attention was being paid to its unaffected traveller’s cheque and card franchise business. But after doing some digging, Buffett noticed the opportunity snapping up American Express shares at a massive discount, which later went on to recover and grow into the $238bn giant it is today.

‘Pick businesses, not stocks’

While everyone was busy looking at the stock price, Buffett stayed focused on the business. And as a result, he discovered a phenomenal buying opportunity. And even after a bit of selling along the way, American Express is now Berkshire Hathaway’s second-largest position in 2025.

Looking at its latest results, the payment processing and lending firm continues to exhibit strength, reaffirming its full-year guidance, while taking active steps to expand its reach to younger generations. Of course, even with size on its side, the firm still has competitive threats to tackle, particularly from the fintech space, that are challenging its 10% annualised revenue growth ambitions.

Nevertheless, Buffett and his team’s conviction remains strong given their position sizing. And with fears of market volatility lurking around the corner, investigating the long-term potential of American Express shares might be a sensible move today.

The post As US stocks get volatile, here’s Warren Buffett’s advice appeared first on The Motley Fool UK.

Timeless investing wisdom

While there are countless lessons to be drawn from Buffett’s annual shareholder letters, the three most prominent, in my opinion, are:

1. “Be fearful when others are greedy and greedy when others are fearful”.
2. “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price”.
3. “Our favourite holding period is forever”.

Combined, these tips preach a long-term focused approach to investing, encouraging contrarian thinking and prioritising quality above price. And we can see this advice in action when looking back across Berkshire’s investments over the years, such as American Express (NYSE:AXP).

Amex ups and downs

Back in 1964, American Express was caught in the middle of the Salad Oil Scandal. The Allied Crude Vegetable Company had fraudulently inflated its salad oil inventory by filling tanks with water and adding a layer of floating oil on top to pass inspections. Why? Because the firm was then able to use this fake inventory to secure loans from American Express.

When the scandal was revealed, American Express saw its share price collapse 50% as panicking investors fled in fear. But Buffett decided to be greedy when others were fearful and used the chaos as an opportunity to start buying shares at a massive discount.

American Express is now a much larger enterprise compared to 60 years ago. Yet, even in the 1960s, the firm still had a premium brand, network effect, and high customer loyalty. Those are all traits of a high-quality or ‘wonderful’ company, in the eyes of Buffett. And even after going through a few rough patches, the ‘Oracle of Omaha’ has never once sold a single share in the business – a textbook example of his ‘buy-and-hold forever’ investing philosophy.

Still worth buying today?

In 2025, American Express continues to exhibit traits of a high-quality enterprise. And with some institutional analysts projecting the stock could climb as high as $371 by this time next year, it seems the firm still has plenty of growth to offer shareholders.

However, Buffett saw his opportunity to buy when the firm’s valuation was in the gutter. And right now, looking at the price-to-earnings ratio, the shares are trading significantly ahead of its 10-year average.

That could be particularly problematic given the group’s sensitivity to the economic cycle and rising concerns of a US tariff-induced economic slowdown in 2025. With that in mind, waiting for a more attractive entry point might be a prudent move to consider. At least, that’s what I think.

The post As Warren Buffett prepares for retirement, here are 3 timeless pieces of his investing wisdom appeared first on The Motley Fool UK.

Will that nervousness spread elsewhere? It may do, although trying to predict what happens next in markets can never be done with certainty.

Whether or not global markets experience turbulence, I am listening to some advice from billionaire investor Warren Buffett.

A good night’s sleep is priceless

When markets are booming and it can seem easy to make money, lots of people can do well. As Warren Buffett says, it is when the tide goes out that you can see who has been swimming naked.

Rocky markets can trouble a lot of people, as they get nervous about their portfolios and how much money they might be losing.

Not, it seems, Warren Buffett. He said, “when forced to choose, I will not trade even a night’s sleep for the chance of extra profits.”

By taking a careful approach to balancing potential rewards with risks, Buffett does not lose sleep worrying about what might be going on in the markets.

See the market as a servant, not a master

How can he stay that calm? After all, over his long career to date, Buffett has experienced some pretty steep losses.

One thing that I think helps is the way he thinks about the stock market. He borrows his teacher Ben Graham’s idea of a person called (in less gender-inclusive days) ‘Mr Market’. Essentially, Mr or Ms Market offers to sell you shares (or buy them from you) at a certain price each day. You can buy, sell or do nothing.

What is so powerful about that as a way of thinking for an investor?

It strikes me as a great reminder about what is going on when the market is tough.

Just because a share price crashes does not force us to sell it. One option is simply to do nothing.

By treating the stock market as his servant, Warren Buffett seems not to worry too much about its twists and turns. He can treat a crash as a buying opportunity, while ignoring a steep price fall if he does not think the underlying investment case for a share he owns has changed.

Invest for the long term

After all, Warren Buffett is a long-term investor.

Consider his stake in financial services company American Express (NYSE: AXP).

He bought into the business when its share price plummeted in 1964 following a scandal involving a third party falsifying levels of commodities that meant American Express did not have the quantity of a commodity (salad oil) it believed it did.

That may sound arcane, but Amex shares plunged – and Warren Buffett pounced as he sensed the opportunity in what he saw as market overreaction. As he says, “be greedy when others are fearful” (although understanding why they are fearful matters).

Over the course of the decades since, his belief in the company’s strong brand, unique business and proven business model has certainly been proved right.

American Express faces risks – a turbulent market could lead to higher consumer credit defaults, eating into profits.

But with his eye firmly on the long term, Warren Buffett focuses on the underlying quality of a business over the economic cycle, not short-term market noise.

The post As US markets wobble, I’m listening to Warren Buffett! appeared first on The Motley Fool UK.

Checking out the gains

The S&P 500’s currently at 6,052 points. This time last year, it was at 4,905 points. This marks an impressive 23.4% gain over the 52-week stretch. This means that the £750 would be worth £925.50. I should note that this is the unrealised gain as we stand. If an investor owned the tracker fund, they would only realise the proceeds if it was sold.

At first glance, this is a large percentage gain. Not only is it a positive return, but it’s also sizeable! But the real question comes as how this stacks up against other options that would have been considered for the investor in January 2024?

They could have gone closer to home and picked a tracker fund on the FTSE 100. In that case, the investor would be up 12.9% instead. So putting money in the US stock market instead would clearly have been a better move.

Active versus passive

Yet in terms of active stock picking versus a passive tracker, there are some differences. If they had picked a member of the ‘Magnificent 7’, the return could be much larger. For example, Nvidia’s stock’s risen 88% over the same time period. Tesla‘s has doubled!

Of course, I have to be careful when making these comparisons. Even though these are popular stocks, it’s equally possible that the investor could have bought another company that lost money.

Looking ahead

It’s true that a S&P 500 tracker could perform well this year again. But I believe investors could find more value in being selective instead. For example, they could consider adding American Express (NYSE:AXP). The charge card and financial services provider has experienced a 57% jump in the share price over the past year.

I think the business could do well this year, with the latest quarterly results out earlier this month showing a 12% jump in net income versus the same period last year. Revenue’s rising, fuelled by “our premium customer base, particularly with Millennial and Gen Z consumers”.

Remember too that even if interest rates fall, the business isn’t as impacted as banks. This is becuase it earns a significant portion of its revenue from card fees and lending rather than just deposits.

However, one risk is that if we see a US recession or general economic lull, it could hit American Express. A slowdown in consumer spending would cause transaction volumes to fall.

Ultimately, I feel stocks like American Express could be considered as part of a diversified portfolio rather than just a passive tracker.

The post Investing £750 in the S&P 500 a year ago would be worth this much now appeared first on The Motley Fool UK.

The brief history

The stock I’m talking about is American Express (NYSE:AXP). It’s a household brand that was founded back in 1850 in America as a freight forwarding and express mail company.

It expanded into travel services and financial services in the following decades, launching a charge card and using plastic cards in the late 1950’s. It’s these cards and similar financial accounts that form the company that exists today.

Buffett first bought shares in American Express back in the early 1960’s, taking a notable stake in 1964 worth $13m. If we fast forward to the latest filing for Buffett’s investment company Berkshire Hathaway, it shows that it makes up just over 15% of the portfolio. The total holding is worth $41.1bn and represents over 21% of the outstanding American Express stock available.

A lesson to learn

American Express shares are up 57% over the past year alone. I can’t find out exactly what the share price was in 1964 when Buffett first bought. But from my calculations it would have been less than $1. The stock now trades at $297.

The first lesson for me here is that there’s a clear benefit of buying and holding a stock that’s doing well. This contrasts to selling after a few months to bank a few fast bucks. American Express has built up a solid business model. And it has succeeded over decades by being flexible and adapting to changing consumer needs.

For example, in the latest quarterly report it spoke about having “already completed 40 product refreshes globally since the beginning of the year, including the recent launch of our new US Consumer Gold Card.” It’s also focusing on Millennial and Gen-Z consumers. These make up the fastest growing consumer cohort overall in the US for the firm.

As it continues to adapt to consumers in the future, I think it can continue to grow profits.

Record highs

However, I’m slightly concerned about the stock recently hitting all-time highs. With a price-to-earnings ratio of 21.88, it’s almost double the ratio figure I’d use to mark a fair value.

Being potentially overvalued is only one point. The brand is facing much stiffer competition from other providers, especially new FinTech companies. So future growth could be stunted as these eat away at market share.

Ultimately, it’s a stock I’m putting on my watchlist. I’d look to buy if the share price moved lower this year. But at current levels, the reward versus the risk doesn’t quite stack up for me right now.

The post Warren Buffett has owned this stock for 60 years. Should I buy it today? appeared first on The Motley Fool UK.

So, what made him so successful, and is it possible for me to mimic his style? To understand some of the details of his prosperity, I’ve focused on one of his longest holdings, American Express (NYSE:AXP).

The Express train to the top

Buffett’s interest in the company began during the 1960s, when the consumer credit market was booming. But the master investor waited for a golden opportunity. A scandal that involved Allied Crude Vegetable Oil Company committing fraud caused American Express shares to plummet. Recognising that the sell-off was unjustified, he invested $20m for a 5% stake.

The timing and situation he waited for to invest underscores a style he is renowned for. The investor typically buys companies when they are undervalued. Events such as a scandal provide an excellent opportunity as long as the business’s financials and operations can stand the test of time.

Buffett noticed American Express for its financial health even before the scandal. The firm had demonstrated exceptional year-over-year revenue growth from 1954 to 1963, the year when he bought his shares in the business.

What’s amazing is that he still owns the investment today. In fact, because the company has performed share buybacks, his equity in the company has increased. As I write, he owns roughly 21% of American Express. His stake is worth about $33.3bn.

Owning great companies forever

The success of the master investor’s position in one of the world’s most famous credit card companies shows the power of holding the greatest investments indefinitely.

I try to find a set of businesses to own a portion of that I think have strong operational advantages, and I always look for a stable balance sheet.

What I want to identify, just like Buffett did so well, is investments that are going to be able to survive and thrive through crashes, corrections, and depressions. That’s never easy, but a strong amount of equity over leverage on the balance sheet goes a long way.

American Express is still a strong investment to this day, and somehow, it’s still growing fast. Analyst estimates predict this will continue for some time yet.

That being said, the company’s revenues are very dependent on wider economic conditions. Wall Street doesn’t consider it recession-resistant by any means. Obviously, if people have less money to spend, they’re likely to use their Amex cards less.

A balanced perspective

What’s great about the business world is that people can choose the way they want to invest.

Some investors like to take high levels of risk and take a very active role, while others, like Buffett, are about risk mitigation and are more passive. What I think is important is having a balanced perspective and understanding our own strengths and risk tolerance.

After all, how much money we decide we want in life is largely a result of our values. Of course, I have to be aware I can lose money in the markets. And wealth generation always takes an active eye and mind, even if the income is passive.

The post Could I get rich like Warren Buffett by holding companies like this? appeared first on The Motley Fool UK.