Warren Buffett says the best businesses to own do the same 1 thing — here are 3 examples from the Oracle’s own portfolio

2 1 minute read

Warren Buffett is known for his straightforward and effective investment advice that cuts through the noise in the financial industry. One of his often overlooked pieces of wisdom is the importance of focusing on the right type of business for investment.

In a letter to Berkshire Hathaway shareholders, Buffett emphasized that the best businesses to own are those that can employ large amounts of capital at high rates of return over an extended period. On the other hand, businesses that require ever-increasing amounts of capital at low rates of return should be avoided.

At the age of 94, Buffett recently announced his retirement as CEO of Berkshire Hathaway, with a net worth of $160 billion, ranking him fifth on the Forbes real-time billionaires index. Despite his retirement, Buffett’s investment philosophy continues to be influential in the financial world.

One of Buffett’s largest holdings is in Apple, which makes up 22% of Berkshire’s portfolio. Despite a major selloff in 2024, Apple remains a strong investment due to its continued popularity, high-margin services, and software segments. Apple’s return on invested capital (ROIC) is an impressive 47%, reflecting the efficient use of capital within the business.

Another long-standing investment in Buffett’s portfolio is Coca-Cola, which he started buying in 1988. With around 400 million shares, Buffett potentially earns over $800 million annually in dividends from his stake in the company. Coca-Cola’s consistent dividends and brand power demonstrate effective capital utilization for investors.

Investors looking to follow Buffett’s strategy can consider platforms like Robinhood and Public, which offer commission-free investing in a wide range of assets, including stocks and ETFs. Additionally, services like Moby provide expert stock and crypto reports to help investors make informed decisions.

In a market filled with noise and conflicting advice, it’s essential to seek guidance from qualified experts to optimize investment strategies. By following proven investment principles and leveraging resources like Moby, investors can enhance their financial knowledge and make informed decisions.

To stay informed about the latest financial insights and trends, readers can subscribe to platforms like Moneywise, which provide valuable information and updates on investing and personal finance. Remember, this article is for informational purposes only and should not be considered as financial advice.