What is Buffett's investment strategy?

巴菲特的投資策略是什麼?

Warren Buffett is nicknamed the "God of Stocks" by Taiwanese investment circles, but he often says that his secret is not mysterious at all: find the value, buy at a reasonable price, and then patiently wait for time to compound . The following points summarize his core philosophy and recent practical cases to help everyone quickly grasp the investment DNA of the "Oracle of Omaha".

1. Three fundamentals of value investing

1. Intrinsic value vs. market price Buffett follows the concept of his teacher Benjamin Graham, first estimating the "intrinsic value" of a company's future cash flow after discounting it, and only considers buying when the stock price is significantly lower than this valuation. This "discount space" is the famous margin of safety .

2. He prefers companies that can "open external plug- ins " for a long time - they have competitive advantages such as brand power, network effects, exclusive patents or high conversion costs to ensure that profits are not easily stolen by others.

3. Excellent management team Buffett likes to find "people who can make money bigger" and then "leave them alone". Once he trusts the management, he will hardly interfere with the operation and free up time to look for the next target.

2. Long-term holding + concentrated firepower

• Time is a good friend of compound interest. He often says, "The ideal holding period is forever." Instead of watching the market every day, it is better to play the long game and let the company's profits work for you.

• Circle of Competence: It is better to invest heavily in the field that you understand rather than to invest in an industry that you are not familiar with. "Don't buy if you don't understand" is the iron rule of the stock god.

• Not afraid of idle cash , rather have less than waste it. At the beginning of 2025, Berkshire's cash level soared to US$347.7 billion because he would rather wait for a truly cost-effective opportunity than rush to spend money.

3. Float Leverage

Buffett has a large amount of "temporarily non-repayable" funds in his hands through insurance companies, which he can then invest to earn higher returns; this low-cost fund is float. For retail investors, you can treat long-term, low-interest sources of funds (such as mortgages, regular fixed salary) as small-scale "personal float" to copy the concept, but you must control the risk.

4. Recent layout cases

Target	Movement & Timing	Core Thinking
Apple	Although it was slightly reduced in 2025, it is still one of Berkshire's top five holdings. Buffett publicly thanked Tim Cook for his contribution.	The moat of "consumer brand + ecological lock" in technology
Japan's five largest trading companies	The stake was increased from the initial 5% to 9.8%, with a total investment of approximately US$23.5 billion.	Commodities and global trade channels, cheap valuations, stable dividends
Occidental Petroleum	Continue to increase holdings to approximately 28% by 2025	Energy price cycle + US oil and gas infrastructure advantages

Key point : Even though he is a "value investor", Buffett will bet on cyclical industries such as technology (Apple) and energy (OXY). As long as the price is reasonable and the moat is in place, he will not set any industry off-limits.

1. Apple: A tech giant, but considered a "consumer necessity" by Buffett

milestone	Operation Summary	Thinking behind the scenes
2016-2018	Apple invested about 35 billion to build a warehouse	The iPhone ecosystem is considered the "world's largest daily necessity" with high stickiness and high gross margins.
1Q–3Q 2024	Slashed by about 67% at highs, leaving 300 million shares at the end of the year	Reduce portfolio concentration and recover funds
Shareholders' Meeting in May 2025	Despite the decline in shareholding, Apple still accounts for about 23% of Berkshire's market value; Buffett publicly said "Tim Cook makes more money than me"	Affirm the management and use the dual engines of "moat + buyback" to amplify compound interest

Core Logic

1. Brand stickiness : The iOS ecosystem locks in users, and the conversion cost is high.

2. Capital Return : Apple repurchases billions of shares every year, passively increasing Buffett's shareholding ratio.

3. Stable cash flow : The proportion of service revenue has increased, and the volatility is lower than that of most technology stocks.

4. Risk control : When a single holding expands to nearly 40% of the portfolio, lock in profits and release cash flexibility by selling.

2. Japan's five largest trading companies: Using the "ultra-low yen" to lock the global raw material gate

milestone	Operation Summary	Thinking behind the scenes
2020 / 08	Announced each holding 5% : Itochu, Mitsubishi, Mitsui, Marubeni, Sumitomo	Taking advantage of the long-term zero interest rate of the Japanese yen, issuing bonds to raise funds to buy stocks, naturally hedge against exchange rates
2023–2024	The increase to the upper limit of 9.8% in batches will cost about 23.5 billion	Low P/E ratio (8-10x), 3-5% dividend yield, and large-scale buybacks have begun
2025 / 05 Shareholders Meeting	Buffett: These holdings " may be held for 50 years or forever "	A diversified trading + resource platform similar to Berkshire Hathaway, with long-term dividends

Core Logic

1. Inflation insurance : Trading companies control upstream metals, agriculture, and energy, and can hedge against US dollar inflation.

2. Cheap + Stable Dividends : Japan’s corporate governance has improved, a buyback boom has emerged, and valuation discounts have gradually recovered.

3. The structure is similar to Berkshire : multiple subsidiaries + cash flow, a business model familiar to Buffett.

4. Low-cost leverage : Financing with Japanese yen bonds at an annual interest rate of less than 1% a year amplifies shareholder returns.

3. Occidental Petroleum (OXY): Betting on North American energy and carbon capture

milestone	Operation Summary	Thinking behind the scenes
2019	Investing 10 billion preferred shares + convertible warrants to help OXY buy Anadarko	Enjoy 8% annual interest + 83.9 M stock warrants, lock in additional "free options"
2022-2024	Buying stocks in the secondary market, the shareholding has increased to 28% (about 265 million shares)	Optimistic about the oil price super cycle and low-cost production capacity in the Permian Basin
Regulatory	In 2022, the company has obtained regulatory approval to increase its shareholding to 50%.	Still stated that it has "no intention to acquire the company outright" and retains strategic flexibility

Core Logic

1. Super cycle + low-cost oil fields : The break-even of Permian oil fields is only about US$40 per barrel; high oil prices directly generate cash.

2. Dual income structure : 8% fixed income of preferred stocks + price elasticity of common stocks.

3. Carbon capture selling point : OXY's 1PointFive built a DAC (direct air capture) plant in the United States and benefited from carbon tax credits in the long term.

4. Trust in management : Buffett praised CEO Vicki Hollub's debt reduction and repurchase strategies, and regarded her as the "energy version of Tim Cook."

Conclusion: Three main lines and one big framework

Main Story	Core Concepts	Buffett's "Universal Template"
Brand and Ecosystem	Apple	Use moats to lock in long-term cash flow
Global real assets + inflation income	Japanese trading company	Low valuation, high dividends, exchange rate leverage
Energy + Transformation and Upgrading	Occidental	Cash Bull + New Energy Layout

Common points : Highly visible cash flow - not relying on macro forecasts, but on the company's ability to make money. Excellent management - Buffett prefers to be an "investor" rather than an "operator". Repurchase or high dividends - returning profits to shareholders and increasing the value of each share. Safety margin - all of which are decisively increasing the stake or using ultra-low-cost funds when the price is attractive.

Understanding the chain of thought in these three cases is equivalent to mastering Buffett’s latest generation of “Value Investing 3.0”:

In the era of the most dramatic industry changes, you can find a few companies that have "predictable cash flow" and are "undervalued by the market", and use patience and cheap funds to amplify compound interest.

5. Five reminders for investors

1. Calculate the value first and then discuss the price : Don’t just look at the price-to-earnings ratio, try to use cash flow discounting or dividend discounting to estimate the true value of the company.

2. Buy so that you can sleep well : If the target makes you toss and turn at night, it means that the position is too large or the research is insufficient.

3. Don’t mistake volatility for risk : the real risk is “not knowing what you are buying.”

4. Keep cash positions : When the Taiwan stock market is at its peak, only when you have bullets in hand can you deal with "others fearing my greed".

5. Continuous learning : Buffett is in his eighties and still reads hundreds of pages of annual reports every day; there is no "graduation ceremony" in investment.

Conclusion

Buffett's strategy sounds simple, but the difficulty lies in discipline and patience . If investors can learn the three axes of "margin of safety + moat + long-term compound interest", and combine them with their own in-the-circle ability and risk tolerance, they will have the opportunity to replicate some of the stock god's winning rate in the Taiwan stock market or the global market. Remember - the market votes in the short term and weighs in the long term . What you need to do is not only to buy hot stocks, but also to wait patiently for the value to emerge.