Money Rehab with Nicole Lapin - 7 Investing Lessons from Warren Buffett

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Starting point is 00:03:28 Results may vary. See chime.com for details and applicable terms. I'm Nicole Lapton, the only financial expert you don't need a dictionary to understand. It's time for some money. At the end of 2025, Warren Buffett at 95 years young, stepped down as the CEO of Berkshire Hathaway and passed the torch over to Greg Abel. Buffett isn't fully out of the picture yet. Don't worry. He is still the chairman of the board, but it is certainly the end of an era and the beginning of a new one. Warren Buffett is one of the most iconic investors of all time, maybe the most iconic. His investing strategy has turned Berkshire Hathaway into one of the most successful companies in history

Starting point is 00:04:18 and made Buffett one of the wealthiest people on the planet. Since taking control of Berkshire Hathaway in 1965, Buffett has delivered an average annual return of around 20%, nearly doubling the S&P 500's average over that same stretch. A $1,000 investment in Berkshire in 1965 would be worth over $30 million today. Because Buffett is such a famed investor, he moves markets. When he invests in something, other investors definitely take note. So how do we answer the question?

Starting point is 00:04:52 What would Warren do when we can no longer look to Berkshire for clues? Well, we can copy his investing frameworks, which lucky for us, are very simple, but they're not easy. Buffett says buy great businesses at fair prices and hold them forever or close to it. But spotting great businesses isn't so easy or else everyone would be beating the S&P 500. So I'm going to unpack some famous examples of Warren Buffett's investment decisions, and then I'll decode the big lessons that we can all take away from those stories. And I know what you might be thinking. We might not have to look away from Berkshire to actually know what Buffett would do. Abel might have studied under Buffett long enough to replicate his money move.

Starting point is 00:05:32 Well, I will say more on that at the very end. But first, some Buffett lore. One of Warren Buffett's most famous and enduring investments is Coca-Cola, which Berkshire began buying in 1988 after the 1987 market crash and would end up putting in around $1.3 billion. Buffett picked Coke because he saw a company with an unshakable brand, massive distribution network, and global pricing power. He also noted the psychological loyalty that people have to their beverage of choice and Coke's ability to raise prices without losing customers.

Starting point is 00:06:05 Today, Berkshire owns more than 6% of the company, and that $1.3 billion investment is now worth over $28 billion, and the dividends alone now exceed $700 million per year. Another classic example of Warren Buffett's strategy is his investment in McDonald's stock during the 2008 financial crisis. With this investment, he took advantage of eight. a temporary undervaluation in a company he deeply admired. Though he didn't hold on to the shares for decades like he did with Coke, the McDonald's investment reflected classic Buffett behavior.

Starting point is 00:06:38 When markets panic, Buffett looks for opportunities in strong, steady businesses that will survive downturns. Now, let's talk about a huge evolution in Buffett strategy. Apple. For years, Warren Buffett avoided tech. He said he didn't understand it well enough to invest in it. But in 2016, Berkshire began buying Apple. Apple. A few years later, it became Berkshire's single biggest holding. Buffett saw Apple not as a tech company, but as a consumer products company with an unmatched ecosystem. Its brand loyalty,

Starting point is 00:07:10 recurring revenue, and pricing power made it look a lot like Coca-Cola, but with better margins. Berkshire invested about $31 billion into Apple. Today, it's worth over $160 billion. And while Buffett trimmed the position slightly in 2023, he's still all in on the iPhone economy. But Before we get too hyped up, Buffett hasn't always hit home runs. Buffett called IBM a long-term investment back in 2011. It did not work out. The company failed to adapt quickly to the shift toward cloud computing, and Buffett eventually sold his stake.

Starting point is 00:07:42 He also missed out on Google and Amazon early on, despite understanding their dominance later on. He said he didn't fully grasp their business models at that time, and that is part of the whole circle of competence discipline. He does not chase what he doesn't. understand even if it means missing out on some upside. But here's the Buffett twist. Even his misses teach us something valuable. You don't have to be right all the time. You just have to be right enough and let your winners compound over time. So zooming out beyond the big tickers, here are

Starting point is 00:08:14 seven big takeaways that you can apply, whether you have a hundred bucks or a hundred million bucks to invest. First, invest in what you understand. Buffett famously stays away from businesses that he doesn't get, which is why for many years he avoided tech stocks. Second, look for durable competitive advantages. He calls them economic moats, things like strong brand identity, pricing power, or network effects that protect a company from competitors. Third, management matters. He invests in companies with competent, shareholder-friendly leadership. Next, buy at a discount to intrinsic value. Value investing is about identifying what a business is truly worth and only buying when that stuff. is priced below that. And be greedy when others are fearful. This is a classic, classic

Starting point is 00:09:02 Buffettism. Crashes create opportunities, so do panic. Also, keep a long time horizon. Compounding works best when you leave it the heck alone. And maybe above all, cash flow is king, or as I like to say, queen. Buffett wants businesses that are not just profitable on paper, but that generate real consistent growing cash flow. So will Buffett's successor Greg Abel be able to follow these seven tenants? Abel, who previously ran Berkshire's non-insurance businesses, has long been seen as a steady Buffett-approved operator with deep knowledge of the firm's culture and financial DNA. While Buffett is still involved as chairman, he's left Abel with both the reins and an

Starting point is 00:09:43 incredible amount of dry powder to work with. As of the end of 2025, Berkshire was sitting on nearly $400 billion in cash and short-term investments, which gives Abel's significant flexibility for future moves. One of his first, reassessing Berkshire's long-held stake in Kraft Hines, a position that Buffett once admitted he overpaid for in a 2015 merger deal that hasn't aged well. Abel now seems to be prepping to scale down or fully exit that investment according to a recent SEC filing. While this move isn't set in stone yet, it certainly signals a desire to clean up the portfolio, a possible reflection of Abel's intent to be a more active and pragmatic steward of Berkshire's holdings. Morningstar analysts

Starting point is 00:10:27 called the move a sign of Abel's willingness to reset the deck early in his tenure. If so, it marks a quiet but meaningful shift away from holding through thick and thin and toward a more strategic, flexible approach while still honoring the foundational values that Buffett built. For today's tip, you can take straight to the bank. Well, today I've been talking a lot about picking individual stocks, Warren Buffett has a directive in his own will that he left for his own wife to invest 90% of their money in S&P 500 index funds and 10% in short-term government bonds, which brings me to my very last Buffettism. Avoid unnecessary risk. Buffett has said that his first role of investing is don't lose money. His second rule is don't forget rule number one.

Money Rehab with Nicole Lapin - 7 Investing Lessons from Warren Buffett

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