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Investing is a noisy industry, but Warren Buffett has always been able to cut through this noise with his simple but powerful advice.
One of Buffet's most overlooked nuggets of wisdom, among the great many he shared over decades spent burnishing his reputation as the Oracle of Omaha, is about focusing on the right type of businesses.
“[T]he best business to own is one that over an extended period can employ large amounts of incremental capital at very high rates of return,” he told his investors in 1992.
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"The worst business to own," Buffett continued, "is one that must, or will, do the opposite — that is, consistently employ ever-greater amounts of capital at very low rates of return."
And that thinking appeared to hold true for the following 30-odd years, as Buffett continued to achieve world-beating success as an investor and executive.
It seemed as if he might go on forever.
But, finally, at 94 years old, Buffett decided to retire from his longtime post as CEO of Berkshire Hathaway, announcing the decision at the company’s annual shareholder meeting in early May. At the time of the announcement, which rocked the business world, he was ranked fifth on the Forbes real-time billionaires index with a net worth of around $160 billion
Berkshire's legendary portfolio has been cited as proof of countless principles over the years, and his view of the "best businesses" — that they're the ones that can continuously reinvest and thereby multiply their profits — has been especially hard to argue with.
Here are some great examples.
Apple (AAPL)
Buffett’s largest holding is the iPhone maker based in Cupertino, California. Notwithstanding a major selloff in 2024, when Berkshire Hathaway dumped roughly $80 billion of Apple stock, the company still makes up 28% of Buffett's portfolio.
The continued popularity of the iPhone, lucrative margins in the software business and new products could sustain Berkshire's stake even after Buffett's vacates the CEO chair.
Read more: BlackRock CEO Larry Fink has an important message for the next wave of American retirees — here's how he says you can best weather the US retirement crisis