Warren Buffett is known for his patient and focused investment strategy. In his 1991 Berkshire Hathaway Annual Letter, he likens the stock market to a mechanism that transfers wealth from active to patient participants. Buffett emphasizes investing in large, understandable businesses with strong economics and exceptional management.
He rejects frequent trading or diversification across mediocre enterprises. Quoting John Maynard Keynes, Buffett advocates concentrating investments in a few well-understood companies with trustworthy management. He notes that success comes from careful selection and long-term commitment, not constant buying and selling.
The letter highlights Berkshire Hathaway’s first significant international investment in Guinness.
Buffett’s patient investment philosophy
It also reaffirms confidence in enduring businesses like Coca-Cola and Gillette.
Buffett’s list of investments reflects his “Rip Van Winkle” approach. Guinness is a new position, but Berkshire held the other seven stocks a year ago, with an unchanged number of shares in six of those. The exception is Federal Home Loan Mortgage (“Freddie Mac”), in which Berkshire’s shareholdings increased slightly.
Buffett suggests that recent events indicate the much-maligned “idle rich” have received a bad rap. They have maintained or increased their wealth while many of the “energetic rich”—aggressive investors—have seen their fortunes disappear. Buffett’s stay-put behavior reflects his view that the stock market serves as a relocation center at which money is moved from the active to the patient.
His approach emphasizes careful selection and long-term commitment to a few well-understood companies with strong fundamentals and management.
