Warren Buffett breaks down how he would invest if he had to start again with $1 million

Summary

In this insightful script, the speaker, presumably Warren Buffett, shares his strategy for achieving a 50% annual return with a small initial investment. He emphasizes the importance of thorough research, using his experience with the Moody's Transportation manual as an example. Buffett details his method of discovering undervalued securities by immersing himself in the details of small companies, a passion that he believes is essential for success in investing. He encourages finding and pursuing what one's brain is best suited for, whether it be in chess, bridge, or the financial markets, and suggests that the audience is already on the right path by attending the annual meeting.

Takeaways

• 📚 The speaker emphasizes the importance of thorough research, mentioning the example of going through 20,000 pages of the Moody's manual to find investment opportunities.
• 🚂 The speaker recounts his experience with the Green Bay and Western railroad company, highlighting the value of detailed knowledge about niche companies.
• 🔍 He suggests that with a small amount of capital, one could potentially achieve a 50% annual return by identifying undervalued securities through exhaustive research.
• 💡 The speaker believes that passion for the subject matter is crucial, not just the desire for financial gain, drawing a parallel to how biologists or chess players are driven by the love of their field.
• 🧠 He acknowledges the complexity of the human brain and how individuals excel when they engage in areas they are naturally suited for and enjoy.
• 🤝 The story of impressing Charlie by knowing details about obscure companies illustrates the power of deep knowledge and its potential to connect with others.
• 🔑 The speaker implies that opportunity cost plays a role in deciding which investment method to use, suggesting a combination of both deep research and value investing.
• 🎯 The speaker advocates for a targeted approach to finding investments, focusing on small companies that may offer outsized returns.
• 🤔 He encourages a mindset of curiosity and continuous learning, much like how one would approach a game or a puzzle, to find hidden investment gems.
• 🌐 The speaker hints at the need to adapt to modern equivalents of Moody's manuals for current investment research, indicating a willingness to evolve with the times.
• 🎲 Lastly, the speaker suggests that the game of investing should be enjoyable, and that one should be on the right track if they are passionate about the process and attend annual meetings.

Q & A

What was the guaranteed annual return mentioned in the script?

The script mentions a guaranteed annual return of 50%.

What was the initial investment scenario described in the script?

The scenario described is starting again with under $1 million.

What method did the speaker use when he was 20 or 21 to find investment opportunities?

The speaker used to go through the Moody Transportation manual, reading about various railroad companies.

What was the nickname for the Green Bay and Western railroad company?

The Green Bay and Western railroad company was nicknamed 'grab baggage and walk'.

What was unique about the Green Bay and Western's bond and common stock?

The bond of Green Bay and Western was actually the common stock, and their common stock was actually a bond.

What impressed Charlie when the speaker first met him?

Charlie was impressed by the speaker's detailed knowledge of small companies on the west coast, which he thought the speaker would never have heard of.

What is the speaker's approach to investing if he had to start again with a small amount of money?

The speaker would try to know everything about everything small, focusing on finding undervalued securities.

What is the speaker's view on the importance of loving the subject in investing?

The speaker emphasizes that one must be in love with the subject of investing, not just the money, to be successful.

What does the speaker suggest about the human brain and its capabilities?

The speaker suggests that the human brain does its best when you find out what it is really suited for and then focus intensely on that area.

What advice does the speaker give to those interested in achieving high returns in investing?

The speaker advises that one should be passionate about the game of investing, find it exciting to expand their knowledge, and focus on finding undervalued securities.

What does the speaker imply about the attendees of the annual meeting?

The speaker implies that attendees of the annual meeting are likely to be interested in investing and have a passion for the subject beyond just playing games like Bridge or chess.