MW These are the secrets to Buffett's investment success, according to this billionaire investor
By Barbara Kollmeyer
Seth Klarman pays tribute to Berkshire's legendary outgoing CEO
Warren Buffett, who will step down as CEO of Berkshire Hathaway at the end of 2025, pictured on Oct. 2013.
This year ushered in one major event that many investors and the larger financial world hoped they'd never see: the world's most respected investor hanging up his hat.
Earlier this year, Warren Buffett announced he would end his six-decade run as Berkshire Hathaway's $(BRK.A)$ $(BRK.B)$ chief executive by the close of 2025, leaving his outsize shoes to be filled by handpicked successor Greg Abel.
Paying tribute to what investors have gained over the decades and will miss going forward, was Seth Klarman, CEO and portfolio manager of the value-oriented investment management fund Baupost Group.
"No one else has ever built such an investment fortune from scratch; it was as if he hit a lottery with an ever-growing payoff, though one based not on luck but on the consistent application of skillful effort," Klarman wrote in an article for The Atlantic that published on Dec. 18, as he tossed in a few valuable takeaways from the investment legend's career.
Buffett's success hinges on his skills as a value investor, "always appraising stocks as fractional-ownership interests in businesses that he planned to hold over the long term," said the manager of the $23.5 billion fund. Unlike many investors, if one of his company's stocks weakened, Buffett would dive in and buy more, he added.
Acknowledging his inclusion in this bunch, Klarman commented that value investors like Buffett are a "quirky breed," often obsessed with stamp or coin collecting at a young age. Then they become bargain hunters, natural contrarians, fans of the long view and largely disciplinarians when it comes to how much a business is actually worth.
"They get excited not by the possibility of an instant gain but by the inexorable math of compounding capital over the long run," said Klarman.
Read: They made big money on risky trades in the market this year. Then they posted about it.
In 2025, even though value stocks appear to be making something of a comeback, it's still been another year that investors have favored those companies with a growth orientation. This year has seen the Vanguard Growth ETF VUG bounce 42% off Liberation Day lows, while Vanguard Value ETF VTV has seen about a 24% rise.
Klarman honed in on five characteristics of Buffett that have contributed to his success, the first being his alert, accurate, quick and decisive mind. Cutting to the core of investments, separate good from bad ones and then great from just OK, and stick with the best names over time is another trait. Buffett has also shown he can stay focused and avoid distractions, and shift his strategy when the opportunity arises to improve, the billionaire wrote.
Buffett also has "successfully navigated" his way through any number of market crisis, booms and busts and technological innovations, and as the financial industry has expanded vastly and more money is chasing after fewer returns, he "just kept on cranking out exceptional returns."
He also proven to the world that one can become a very wealthy person just by "a commonsensical plan to buy and hold shares in high-quality, publicly traded businesses," said Klarman. Trendy investments were not his thing, and Buffett's actions are a reminder that when one finds a compelling investment idea, "you shouldn't be afraid to load up."
Buffett is also living proof that "one could prosper by uncovering market inefficiencies," pushing back in the 1960s and 1970s on the idea that in efficient markets, stock prices quickly absorb new information, said Klarman. Buffett was also looking to improve his way of thinking, ultimately being deeply influenced by the late growth investor Philip Fisher as well as his longtime friend and famed right-hand man Charlie Munger who died in 2023, he adds.
"As a result, he refined his approach to focus less on lower-quality companies trading at bottom-of-the-barrel valuations and more on the quality of the underlying businesses, even when that meant paying up, because the higher quality would likely lead to a growing and more valuable investment," said Klarman.
The fact that Buffett was able to build his fortune from scratch isn't his most amazing accomplishment, noted Klarman. "Rather, Buffett's most significant feat was the way he vaulted as a young man to investment success and then managed to perform at the top of his game for his entire adult life, for nearly three-quarters of a century."
Klarman praised Buffett for heading up one of the world's most respected companies not by caring what others think, but "steadily focusing on doing the right thing for the business and its shareholders."
"Buffett will be particularly missed at a time when many of the most successful people in the business community seem single-mindedly focused on making money, without reflecting much on the way they make it or what they will do with it. Just because you can doesn't mean you should," said Klarman.
Read: Why I'm moving my money out of U.S. stocks - just like Warren Buffett
-Barbara Kollmeyer
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December 19, 2025 08:20 ET (13:20 GMT)
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