At Berkshire Hathaway’s annual shareholder meeting on May 3, legendary investor Warren Buffett announced he plans to step down as CEO at the end of 2025. Buffett will be 95 years old by then, so no one could blame him for wanting to spend more time on the golf course. However, we suspect the real reason for Buffett’s decision is that he thinks CEO-in-waiting Greg Abel will do a better job, bringing more energy and ambition to the role (even if somewhat less wisdom and experience).
Buffett’s record will probably never be matched. Over 60 years as CEO, he compounded Berkshire’s value at nearly 20% per year. That’s enough to turn $1,000 into more than $55 million! Buffett’s investment philosophy was the inspiration for Trajan Wealth’s Expanding Moat and Defensive Moat strategies.
From Failing Textile Manufacturer to Global Conglomerate
Buffett first took control of Berkshire Hathaway in 1965 when it was a struggling New England textile manufacturer. He couldn’t save the textile business from an onslaught of foreign competition, so he redirected its cash flows toward more promising ventures.
One of the most important was the insurance industry, where Berkshire acquired companies such as GEICO and National Indemnity. Insurers collect premiums months or years before having to pay claims, which creates “float” that can be put toward other investments. Over the decades, Berkshire used this float to acquire or take major equity stakes in many iconic businesses such as Coca-Cola, American Express, See’s Candies, Marmon, Benjamin Moore, BNSF Railway, and Apple.
Five Buffett Investment Principles
Below are some of our favorite Buffett quotes which inspired our own investment philosophy:
1. “Risk comes from not knowing what you’re doing.”
Buffett emphasizes the importance of staying within one’s “circle of competence.” That means doing intensive research to understand your investments better than anyone else. It also means recognizing that some things are simply unknowable—and avoiding those areas of the market. If you don’t have the time or inclination to do your own investment research, leave it to the professionals at Trajan Wealth.
2. “The stock market is a device for transferring money from the impatient to the patient.”
Buffett’s favorite holding period is “forever.” You could say that his whole life was a lesson in the power of compounding—and the importance of patience. Even after donating more than half his Berkshire shares to charity, Buffett’s net worth is estimated to be around $160 billion. Incredibly, more than 99% of his wealth was accumulated after Buffett turned 65!
3. “It’s far better to buy a wonderful company at a fair price, than a fair company at a wonderful price.”
Buffett credited his business partner Charlie Munger, who died in Nov. 2023, with teaching him this lesson. Early in his career, Buffett primarily invested in low-quality stocks at deeply depressed valuations. By shifting to “wonderful companies at a fair price,” he found he could hold onto the same stocks for decades while they grew their earnings and compounded their intrinsic values, producing superior long-term results.
4. “What we’re trying to do is find a business with a wide and long-lasting moat around it, protecting a terrific economic castle.”
Buffett originated the metaphor of an “economic moat” to mean a structural competitive advantage. Moats can take many different forms, such as brand names, low-cost operations, or network effects. Any successful business will attract lots of competitors—the moat is what keeps them away.
5. “Big opportunities come infrequently. When it’s raining gold, reach for a bucket, not a thimble.”
This reminds us of another famous Buffett quote: “Be fearful when others are greedy, and greedy when others are fearful.” Successful investors need the discipline to stick with their investment strategy through good times and bad, and the courage to act decisively when great opportunities present themselves.
What’s Next for Berkshire?
It’s the end of an era for Berkshire Hathaway, first with the passing of Charlie Munger and now Buffett’s retirement. However, it should be “business as usual” in the near term. Berkshire has always been structured as a collection of independent, minimally supervised businesses. While the company employs nearly 400,000 people overall, fewer than 30 of them are believed to work in its corporate headquarters in Omaha. The subsidiaries were chosen for their enduring competitive advantages and deeply ingrained cultures that should survive a management transition at the top.
The longer-term challenge will be intelligently deploying Berkshire’s huge cash flows—not to mention the nearly $350 billion of cash and short-term bonds already on the company’s balance sheet! Incoming CEO Greg Abel has a reputation as an expert business operator, but his skill as an investor is untested. There’s almost no chance he can live up to the high bar set by Buffett. It will be interesting to see what the company decides to do with all that cash. Buffett won’t like the idea, but perhaps Berkshire will finally start paying a dividend!
