Warren Buffett’s investment secret: focus on buying quality companies

To truly build wealth, Buffett and Munger needed companies they could hold for decades, even forever.

To do that, they changed their focus to quality companies like See’s Candies.

And it worked. When Buffett and Munger bought See’s in 1972, it brought in about $2 million in profits. By 2007, it made $82 million in profits. That’s an annual growth of 11.1%.

But that’s not all.

The company has earned $1.9 billion of pretax profits on just $40 million of capital investments since 1972.

Of the $1.9 billion earned, Buffett was able to keep nearly 100% to reinvest in other businesses and stocks. That means that his actual return was much higher than 11.1%.

Buffett and Munger’s approach lies at the core of our investment philosophy at the Legacy Portfolio. It’s the surest, safest way to generate enormous wealth in the stock market. (If you want to learn how to identify a “capital efficient” business on your own, read this free essay by Porter Stansberry: “The Greatest Investment Secret Ever.”)