To Be the Next Warren Buffett, Don’t Invest Like Buffett

Charlie Munger, Berkshire Hathaway (NYSE: BRK.b) co-chairman and Warren Buffett confidant, offered an honest assessment last week.
Speaking at a Daily Journal Corp. (NASDAQ: DJCO) annual shareholders meeting, Munger said, “I don’t think you’re going to get the kind of results we [Buffett and Munger] got by just doing what we did.”
Munger backed his assessment with a fishing analogy, which I’ll paraphrase: Fish where the fish are. If everyone fishes where the fish are, catching fish becomes increasingly difficult.
The investing connection is easy enough to conjure. If everyone invests in the same companies, generating superior returns becomes increasingly difficult.
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Invest Like Buffett?

I’ll do Munger one better. If Buffett were a fledgling investor today, odds are infinitesimally low that he would grow into the gargantuan fishing outlier we know today.
Sages throughout history have noted the importance of timing. Where you’re born, when you’re born, and to whom you’re born guide the odds for success.
Warren Buffett was born in Omaha, Neb. on Aug. 30, 1930. He was born in a country that rewarded productive enterprise and work. He was born to pragmatic, intelligent parents. He was born at a time when the stock market was democratizing.
The stars were aligned.
The time was right to begin investing. Buffett was also fortunate enough to be born in a less efficient, more exploitable epoch. A curious mind and an enterprising spirit, of which Buffett inarguably possesses both, offered more fishing holes stocked with more fish and more catches.
More fishing holes, to be sure, but not necessarily holes easily fished. Here, I speak from experience, one likely similar enough to Buffett’s initial experience.
I began investing in the 1980s while in college. My investing explorations and research were much more tactile and time-consuming compared to today.
Thirty years ago, I would scour the Wall Street Journal’s stock sheets line by line. I would read the articles printed in the Journal and its sister publication Barron’s stem to stern. I would compile a list of promising stocks along the way.
Then it was off to the college library with my list of promising stocks, written in a composition notebook, to review Standard & Poor’s and Value Line analyses of my list. I would invariably find additional prospects along the way that required research.
Ten hours of work in the 1980s were required to achieve what can be accomplished in 10 minutes today. I view the relative inefficiency fondly, though. Sweat equity was rewarded, and few people relative to the general population are willing to accumulate sweat equity. The fishing holes were more plentiful and more amply stocked.

Lots of Competition

If Buffett were starting today, he would find the competition more plentiful compared to the 1950s and 1960s. Given his intelligence and market insight, I have no doubt a youthful Buffett today would continually reel in the large catches. I have a lot of doubt, though, that he would reel in the string of large catches that would rival the catches reeled in over the past 60 years.
As for the octogenarian Buffett of today, prior investing successes force him to fish the same waters that every retail and institutional investor fishes. No See’s Candies nor Geico insurance reside in Buffett’s future. Buffett’s future is all large-cap, low-growth dividend stocks: Apple (NASDAQ: AAPL), Wells Fargo (NYSE: WFC), Kraft Heinz (NYSE: KHC), Coca-Cola (NYSE: KO), and similar behemoths.
If you want to become the Warren Buffett of tomorrow, you can’t invest like Buffett . . . that is, the Warren Buffett of today.
If the goal is more modest, the reverse is true. You can also invest to outperform Warren Buffett  (or at least outperform the Berkshire Hathaway of today) by investing like Buffett today. To invest like Buffett, buy good businesses at good prices; measure holding periods in years; eschew margin debt; endure looking foolish at times.
But most of all, buy dividend stocks. Buy the dividend stocks, particularly the dividend-growth stocks, unavailable to Berkshire Hathaway. Buffett’s fishing expeditions for Berkshire are limited to oceans. Yours are unlimited. Your advantage is easy enough to exploit.

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