Warren Buffett is perhaps the most famous investor in the world. The ‘Oracle of Omaha’ bought his first stock aged 11 and was filing taxes by 13.
Buffett is best known for running Berkshire Hathaway, which is a conglomerate holding company that owns businesses in insurance, rail transportation, energy generation and distribution, manufacturing, and retailing.
Over the years, Buffett has established himself as one of the most successful investors of all time. He’s delivered returns of almost 200% in the past 10 years alone.
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So, what’s the key to his success and how would I use the Buffett approach to build my wealth from scratch? Let’s take a look.
A simple approach to investing
So far, Buffett’s success has been based on a surprisingly straightforward approach to building wealth. He places the emphasis on investing in good businesses with trustworthy managers at fair prices.
To follow in his footsteps, I’d aim to identify high-quality UK companies that I’d be happy to buy and hold for the long term.
The crucial part here is willingness to be in it for the long run. To illustrate, Buffett generated over 90% of his wealth after the age of 65.
This is thanks to the effect of compound returns, which is the key to building long-term wealth from scratch.
Adopting the Buffett style
Having outlined Buffett’s strategy, what companies should I be targeting to invest like him?
Well, thankfully for me, Buffett isn’t shy about showing what his portfolio looks like.
Upon scanning the holdings of his company Berkshire Hathaway, I noticed a lot of well-established, high-quality businesses. This includes the likes of Apple, Amazon, Bank of America, Diageo, and Kraft Heinz.
Interestingly, I also noticed Buffett bets big on oil. Berkshire Hathaway is the biggest shareholder in both Chevron and Occidental Petroleum, which are two of the largest oil producers in the world.
As a result, to emulate Buffett’s approach and seek to build long-term wealth, I’d focus on identifying top-quality FTSE 100 and FTSE 250 stocks that I think can deliver strong returns in the long run.
First-rate UK shares
Upon scanning both indexes, a few companies jump out at me.
For example, I’m eyeing up oil supermajors BP and Shell. Both are titans of the Footise index and have delivered outstanding financial results amid the geopolitical turmoil.
While the main risk is that their fortunes are heavily tied to the often-volatile price of oil, I’m confident in both firms’ long-term outlook.
In particular, I like that both are investing heavily in bioenergy and renewables, which presents a potentially-lucrative business line in the long term.
A company Buffett would invest in?
When it comes to good businesses with trustworthy managers, I can’t help but think of consumer goods giant Unilever.
Despite former CEO Alan Jope announcing his retirement last year, the group reported at the beginning of 2023 that Hein Schumacher would take over.
Schumacher is a business leader with an excellent track record across multiple leading companies in the consumer goods industry. Consequently, I think Unilever is in safe hands going forward.
Key risks still remain though. For example, unstable macroeconomic conditions could continue to take their toll on volumes.
However, I’m confident that Unilever’s immense brand power, stemming from its globally-trusted brands, will prove more than sufficient to help the company navigate the storm.
