The significance of Buffett and the ten characteristics of Buffett's investment, be a long-term 'good person'

Red and Green Guide:

Warren Buffett's decades-long investment legend teaches us that investing is about investing in companies and entrepreneurs, and their long-term value creation capabilities. Therefore, wherever companies and entrepreneurs have the conditions to focus on value creation in a long-term, stable, and predictable market, a new Buffett may emerge.

Source: Qin Shuo's Circle of Friends

1. Can We First Be

Good People and Remain Good in the Long Run?

In the past, the annual meeting lasted one day, starting at 8:30 a.m. with a movie, followed by Q&A after 9 a.m., and then more Q&A after the lunch break. This year, the meeting started at 8 a.m., and the movie segment was canceled. After some small talk, Buffett went straight into the Q&A session, with a short break in between, and ended around 2 p.m.

His mind is still sharp, but his energy is clearly not what it used to be, and his voice lacks the vigor it once had. Clearly, shortening the meeting was a wise decision.

At the end of the Q&A, he suddenly announced his plan to retire by the end of the year and would propose to the board that Greg Abel officially take over as CEO. Since acquiring Berkshire in 1965, he has led the company for a full 60 years.

This year's annual meeting was attended by 40,000 people. We started queuing outside the venue a little after 7 a.m. and took about an hour and a half to get in, with every seat inside taken. Some had queued the night before, and others paid $150 or $200 to hire someone to queue for them. A Shanghai investor I met said he had two young employees from his company buy small stools and queue overnight.

Why do so many people from the U.S. and around the world attend Buffett's annual meeting?

I think Buffett represents accessible, understandable investing. He doesn't engage in cutting-edge venture capital, innovative investments, or flashy financial tricks, nor does he dabble in intangible and perplexing things like cryptocurrencies. He belongs to the economic fundamentals and the general public.

Decades ago, he said, "Monetary and fiscal policies are important, but the core is still the company itself." He emphasizes the importance of cash flow and return on investment. He has built a foundation of long-term, value investing for the public, earning their trust with reliable performance.

There were many middle-aged and elderly people at the event. "Those who love the people will always be loved by the people." Buffett has given them good investment returns, so they often attend the annual meeting—not so much as a pilgrimage but as a way to thank a trusted old friend.

In China, many people feel anxious when it comes to investing, fearing they'll become "chives" (naive investors), and indeed, they often pay tuition fees. But when it comes to Buffett, the first feeling investors have is reassurance. His long-term performance is outstanding, and how he invests is crystal clear. He is upright, honest, and has genuinely helped people make money. Ultimately, he will gradually donate his Berkshire shares to give back to society.

Professional investors, especially those managing other people's money—can they first be good people and remain good in the long run? This may be more important than investing itself.

Being "good" means doing your utmost to live up to the trust of those who entrust you and the faith of shareholders.

Buffett is such a person. He invests for the people, creating good returns and making people believe that investing is valuable. I think this is his most significant contribution to our noisy, complex era.

2. A Comprehensive and Dialectical View of Buffett's Investments

When it comes to Buffett's investments, what people know is investing in companies, long-term investing, value investing, maintaining a margin of safety, buying good companies at reasonable prices, and so on.

I've summarized it and gave a speech at the 10th U.S.-China Investor Annual Meeting hosted by Sina Finance and other institutions on the afternoon of May 3.

I believe Buffett's investment approach has the following ten characteristics.

1. Committed to long-term investing but not rigid.

Buffett adheres to long-term investing and is not swayed by short-term market sentiment. He once said that if you don't want to hold a stock for ten years, don't hold it for ten minutes. At this year's meeting, he also said that the market fluctuations of the past 30 or 45 days really don't matter. He has always been calm in the face of short-term volatility.

But long-term investing doesn't mean no adjustments, staying completely still. Berkshire's stockholding reports from 1980 to 2006 show that the median holding period was one year, meaning more than half of the stocks were held for one year. Twenty percent of the stocks were held for more than two years, and 30% were sold within six months. Clearly, he doesn't hold every stock long-term. Even with a stock as excellent as Apple, he significantly reduced his holdings last year.

2. Committed to equity investing but flexible in balancing.

Buffett's investments are in company equity. He said, "Berkshire will never prefer holding cash-equivalent assets over owning equity in excellent businesses, whether controlling or partial stakes."

But equity investing doesn't mean abandoning other balancing investments, such as Treasury bonds. In his February letter to shareholders, Buffett said that Berkshire's performance in 2024 exceeded expectations, even though 53% of its 189 operating businesses saw declining earnings. However, the significant increase in short-term U.S. Treasury holdings and improved yields helped investment income grow substantially.

3. Investing in stocks, but more in controlling stakes.

Berkshire has two ways of holding stocks.

One is owning controlling stakes in many businesses, holding at least 80% or even 100% of the shares.

The other is minority investments in a dozen large, highly profitable companies, such as Apple, American Express, Coca-Cola, and Moody's.

Buffett wrote in his letter to shareholders: "In 2024, the value of Berkshire's marketable stocks fell from $354 billion to $272 billion, but the value of its unlisted controlling stakes increased and remains far higher than that of its marketable stock portfolio."

Clearly, Berkshire invests in stocks but prioritizes controlling stakes, and it "almost never sells controlling businesses unless faced with unsolvable problems."

Why are controlling stakes more important than stock investments? Buffett gives three reasons:

First, at Berkshire's current size, it can't easily buy or sell stocks. Sometimes it takes a year or more to build or exit an investment.

Second, for companies where it holds minority stakes, it can't replace management or control capital allocation when needed. Even if dissatisfied with decisions, it can't effectively intervene.

Third, truly outstanding businesses are rarely sold outright; they're only occasionally available at bargain prices during Wall Street trading hours.

Buffett's investment core is companies, and stock investments come with constraints, so he values controlling stakes more.

4. Committed to investing in the real economy.

Beyond insurance, railroads and utilities are two major businesses for Berkshire. Buffett has repeatedly stated that he will continue investing in core areas like insurance, railroads, and energy. These are foundational, perpetual investments.

Buffett also likes investing in branded consumer goods because they "can maintain stable, high returns without requiring additional large-scale capital investments." This is also real-economy-focused investing.

5. Patiently waiting for high-quality investment opportunities.

By the end of 2024, Berkshire's cash level hit a new record of $334.2 billion. But given market uncertainties, Buffett is in no hurry to deploy it. At the annual meeting, he said, "The probability of deploying this cash tomorrow is very low, but the likelihood within five years is not small." In other words, it's fine if it takes five years.

He also said one problem with investing is that opportunities don't come in order. The company is always looking for assets that can create long-term value, but high-quality investment targets are scarce and require patience. "Over time, the probability of finding good opportunities increases."

However, when an exceptionally obvious opportunity arises, he doesn't hesitate. In the first quarter of 2009, amid the aftermath of the subprime crisis, the S&P 500 fell to around 600 points. He said, "Opportunities like this are very rare. When it's raining gold, reach for a bucket, not a thimble."

6. Continuous reinvestment.

Paying dividends to shareholders is one way to give back, but not paying dividends and instead reinvesting to increase company value is another. Buffett chooses the latter. From 1965 to 2024, Berkshire shareholders have continuously reinvested, receiving only one cash dividend.

Buffett said that, in a way, Berkshire shareholders, by forgoing dividends and choosing to reinvest rather than consume, have participated in creating the American miracle. "This is the result of a culture of continuous savings combined with the magic of long-term compounding."

Berkshire's current share price is $809,350, with a market cap of $1.164 trillion. Over 60 years, continuous shareholder reinvestment has fueled the company's growth and generated enough taxable income to pay over $101 billion in cumulative income taxes to the IRS.

7. Belief in the future.

Despite unpredictability and turbulence, Buffett maintains a clear optimism about the world and believes in the future. His mindset is very positive. This time, he talked about tariffs not being used as weapons, saying, "I do believe that the more prosperous the rest of the world is, the better off we will be—not worse off—and the safer our children will feel."

8. Belief in national destiny.

Buffett has long heavily invested in U.S. companies. He believes that no matter the challenges, America has unique resilience and opportunities. He said, "Berkshire could not have achieved its current success anywhere but the U.S. And even if Berkshire had never existed, America would have achieved the same success."

He has always felt deep gratitude toward America. In his latest letter, he wrote:

"Lacking athletic talent, a fine voice, medical or legal skills, or any special talents, I've had to rely on investing in stocks all my life. In fact, I've always relied on the success of American businesses, and I still do.

"So, thank you, Uncle Sam. Someday, Berkshire's successors will want to pay you more taxes than in 2024. Please use them wisely to take care of those less fortunate in life—they deserve better. And never forget, we need you to maintain a stable currency, which requires your wisdom and constant vigilance."

Beyond the U.S., Buffett is also bullish on Japan. Berkshire first bought shares in Japan's five major trading houses in July 2019, and Buffett emphasized that these are long-term holdings. At the annual meeting, his fondness for Japanese companies was evident.

9. Belief in the common sense he holds.

There are many investment styles, and Berkshire's is to encourage caution. "We're not particularly good at being the fastest mover or the first in the market."

Buffett long ago said he wouldn't invest in tech companies he couldn't understand or follow market trends. In 1999, he said, "Not buying high-tech stocks is because I can't tell which companies have long-term competitive advantages."

That year, he even apologized to shareholders for poor performance, but he didn't change his investment style. AI is very hot now, but Berkshire's stance is that while AI "could be a real game-changer," it won't blindly follow the hype.

Buffett has repeatedly said in public that Berkshire's investment philosophy is "understandable businesses." Only after fully understanding how emerging technologies impact core businesses will it invest heavily.

10. Belief in entrepreneurs.

Buffett values entrepreneurs and has repeatedly emphasized the importance of entrepreneurial spirit in stock investing, believing that "good ideas plus good managers equal good results."

Last year, Berkshire's insurance business saw significant profit growth, with GEICO (America's fourth-largest auto insurer) performing particularly well. Buffett praised its CEO, Todd Combs, saying that over the past five years, he has implemented major reforms at GEICO, improving efficiency and updating underwriting standards.

In his letter to shareholders, Buffett said GEICO is a gem worth holding long-term but needs polishing, and Todd is working on it tirelessly.

Of these ten points, the first six are Buffett's investment style, and the last four are his beliefs. They complement each other.

3. Conclusion

Today's world is full of challenges, and tomorrow's is full of uncertainty.

Buffett bets on companies and entrepreneurs. He believes that as long as a company's or individual's goods or services are welcomed by people, they can usually find ways to cope with instability like currency fluctuations.

Warren Buffett's decades-long investment legend teaches us thatinvesting is about investing in companies and entrepreneurs, and their long-term value creation capabilities.

Therefore, wherever companies and entrepreneurs have the conditions to focus on value creation in a long-term, stable, and predictable market, a new Buffett may emerge.