Invest Like Buffett

These companies have the hallmarks that Warren would love.

- John Waggoner

Most people want to invest like Warren Buffett, the wealthiest man in Omaha, Neb., and 99.9% of the surrounding universe. That’s why they flock to Berkshire Hathaway’s annual meeting in May of each year, hoping to glean some wisdom from Berkshire’s CEO.

Buffett’s $82.5 billion estimated net worth makes him the world’s third-wealthiest man, behind Microsoft’s Bill Gates and Amazon’s Jeff Bezos. Unlike Gates and Bezos, however, Buffett’s fortune came from investing in other companies. Since Buffett took control of Berkshire Hathaway in 1964, the price of Berkshire’s A shares has increased at an annualized rate of 20.5%, compared with 18.7% for Standard & Poor’s 500-stock index.

Like most wildly successful investors, Buffett makes it sound easy: Buy quality companies with great businesses, and try to buy low when the opportunity arises. Invest for the long term. Those rules—and a canny eye for opportunity— have led Berkshire to stocks as diverse as Apple, CocaCola, Costco and Visa.

Most stocks, even the ones Buffett loves, aren’t cheap. “Prices are sky-high for businesses possessing decent long-term prospects,” Buffett said in his 2018 shareholder letter. The eight stocks below embody virtues that Buffett loves. Not all are bargains, but all are high-quality stocks with rock-solid balance sheets, strong competitive advantages, prodigious cash generation or the power to raise prices, even in tough times. (Share prices and other data are as of March 15.)

BRAWNY BALANCE SHEETS

Buffett loves a company with lots of cash and little debt, which means it can see its way through tough times and even snap up rivals at bargain prices when the economy turns south.

Mutual fund company