Warren Buffett’s recent announcement that he’ll step down from Berkshire Hathaway marks a milestone—not just for his company, but for investing itself. Few figures in financial history have shaped our understanding of markets quite as profoundly as Buffett, whose patient, disciplined approach turned a struggling textile business into a financial powerhouse worth over a trillion dollars today. But beyond Berkshire’s astonishing cumulative returns—over 4 million percent since Buffett took control in 1965—the real legacy is how Buffett redefined value investing and demonstrated its timeless relevance.
When Buffett began his investing career, he closely followed the teachings of his mentor, Benjamin Graham. Graham’s core idea was simple but powerful: invest in companies trading below their intrinsic value—essentially, stocks that were cheap based on their fundamentals like earnings, book value, and dividends. Buffett initially stuck closely to this playbook, combing through financial statements to find undervalued, often overlooked businesses whose prices didn’t yet reflect their true worth.
But Buffett’s genius wasn’t just in following Graham’s principles; it was recognizing when those principles needed adaptation. Over the years, Buffett moved beyond simple measures of “cheapness” toward deeper evaluations of quality. Instead of just looking for stocks that were inexpensive, he sought companies with strong competitive advantages, predictable earnings, and outstanding management teams. This shift was pivotal: Buffett realized the greatest value wasn’t always the cheapest stock, but rather the company with the most reliable long-term cash flows and sustainable market positions.
This evolution was clearly illustrated in Buffett’s famous investment in See’s Candies. Purchased in 1972, See’s wasn’t a typical “value” pick—it wasn’t exceptionally cheap by traditional metrics—but its brand strength allowed for steady price increases year after year, translating into remarkable profitability. Buffett learned an essential lesson here, one he openly shared with investors: sometimes paying a fair price for an exceptional business could yield greater returns than paying a bargain price for a mediocre one.
Another cornerstone of Buffett’s approach was his cautious and strategic management of Berkshire’s substantial cash reserves. Some critics wondered why he would keep billions in cash and Treasury bills, especially during prolonged bull markets. Yet Buffett understood something crucial: markets inevitably swing from optimism to pessimism, and cash provided the flexibility to capitalize on sudden opportunities. Whether during the financial crisis of 2008, when Buffett provided critical liquidity to major firms, or more recent market volatility, Buffett’s readiness and patience repeatedly proved invaluable.
Buffett also famously avoided investments he didn’t understand deeply, no matter how fashionable or profitable they might seem at the time. During the dot-com bubble, his reluctance to chase internet stocks was widely criticized. Yet when the bubble burst, his disciplined refusal to compromise his core investing principles once again reinforced the wisdom of his method.
Value investing, as shaped by Buffett, thus transformed into something richer and more nuanced. Rather than simply buying stocks with low price-to-earnings ratios or high dividend yields, it evolved into a disciplined philosophy emphasizing quality, predictability, patience, and discipline.
As Buffett steps away, his approach remains influential precisely because it is flexible enough to adapt yet disciplined enough to withstand fads and market extremes. Buffett’s chosen successor, Greg Abel, is widely expected to carry forward these principles—focusing on strong, well-managed businesses capable of producing stable cash flows and long-term growth.
While Buffett himself often humbly attributed his success to common sense and patience, his legacy in reshaping value investing is profound. In today’s markets, filled with ever-changing trends and endless speculation, the simplicity and discipline of Buffett’s method still offer a clear path forward for a very specific type of investing that is likely to keep evolving thanks to innovations provided by a new generation.