Financial Opportunities Uncovered: A Keeler & Nadler Family Wealth Podcast

How did Warren Buffett build an empire one 'moat' at a time?  Think ketchup.

• Andy Keeler

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Warren Buffett once said, "I try to invest in businesses that are so wonderful an idiot can run them, because sooner or later one will." This refreshingly simple approach has helped build one of history's greatest fortunes over six decades and offers profound lessons for investors at every level.

As Buffett prepares to step down from Berkshire Hathaway at 94, we explore the timeless wisdom that has guided his extraordinary career.  The cornerstone of Buffett's philosophy centers on investing in companies with strong "moats" – sustainable competitive advantages that protect businesses from competitors. Whether through powerful brands (Heinz), high switching costs (Microsoft), or network effects (Apple), these moats enable long-term profitability that Buffett prizes above all. His famous "buy low, sell never" approach minimizes turnover and taxes while allowing compounding to work its magic.

Perhaps most valuable is Buffett's emphasis on investor temperament, which Andy talks about on many of our episodes.  While intelligence matters, emotional discipline during market volatility separates successful investors from the crowd. Buffett's contrarian advice to "be fearful when others are greedy, and greedy when others are fearful" highlights why psychology often determines investment outcomes more than technical skill.

Whether you're just starting your investment journey or have a substantial portfolio, these principles transcend market cycles and economic conditions. The Oracle of Omaha's greatest gift may be showing us that extraordinary results can come from ordinary wisdom, consistently applied.

The opinions expressed in this program are for general informational purposes only and are not intended to provide specific advice or recommendations.

It is only intended to provide education about finance, tax, retirement and related planning topics. To determine which investments or strategies may be appropriate for you, consult your financial, tax or legal advisor prior to implementing. Any past performance discussed during this program is no guarantee of future results.

Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional.

Keeler & Nadler Family Wealth is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Keeler & Nadler Family Wealth and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Keeler & Nadler Family Wealth unless a client service agreement is in place.


Andy Keeler:

This year, at the age of 94, Warren Buffett announced his plans to hang it up at the end of the year. So today, on episode 25 of Financial Opportunities Uncovered, we thought it would be fun to reflect on some of our favorite Buffett kernels of wisdom. Helping me to pare down the volumes of juicy goodness and decode some of Buffett's comments from his 60th annual meeting is our regular, Mark Beaver, who heads our investment team here. How's it going, Mark? It's going well, thanks. So there's some beautiful simplicity to the way that Buffett evaluates companies. One of my favorite quotes is - I try to invest in businesses that are so wonderful an idiot can run them, because sooner or later one will. And so in this episode, while we may get into some kind of technical stuff and some statistics, what I want listeners to take away is that you really don't need to overthink your investment decisions. One of his other famous quotes is -- buy low, sell never. Many of the companies that he owns he's owned for a really long period of time, and one of the things that we try to do here at Keillor Nadler is do the research in the front end, so that we're not chasing our tails and constantly having to make adjustments to the portfolio, selling one thing to buy another, paying taxes in the process. So again, for listeners, the takeaway here is don't overthink it. You don't have to be a CFA to invest in stocks. Use some common sense.

Andy Keeler:

One of his other famous quotes that I like to cite is -- be fearful when others are greedy, and greedy when others are fearful. So we talked about that in one of the episodes where we're talking about stock market the Dow Jones hitting 40,000. It's typically in the late part of a market cycle that folks really want to start investing more, so they're essentially buying into that euphoria and that greed, possibly overpaying for companies. Buffett likes to buy stuff on sale and so maybe a company had a period of time where their management wasn't very stellar. So poor management, maybe it was one of those idiots running the company. He figures if he buys a majority stake, he can put a management team in there, turn the company around, but the fundamentals of the company can be strong.

Andy Keeler:

Clearly he's a value investor and I like to say pretty much in anything real estate, businesses, stocks you make money when you buy it. So you make money in real estate when you buy it, when you pay the right price for it. Otherwise, things just kind of do what they do. So, Mark, I've already stolen a couple of my favorite Buffett quotes. What are yours?

Mark Beaver :

One that I've used a lot over time is -- in the short run, the market is a voting machine. In the long run, it's a weighing machine. I think we talked about that in an earlier episode, and it's an eloquent way of saying in the short run, year to year, day to day, everyone bickers and argues about the price of stocks.

Andy Keeler:

The market's voting every minute of every day as to what the fair price is for a stock . Yep.

Mark Beaver :

But over time, the earnings that they create and grow are actually going to happen and dictate the long-term price of that company. So that's the machine the weighing machine that works its way out over time. Which is why he's saying they have such a long outlook on their investments because that's what they're purchasing. They're purchasing the future earnings growth, not because they think that tomorrow the price is going to go up or a year from now. They actually hope it goes down in both of those timeframes so they can buy more of it, gotcha.

Andy Keeler:

So later in the episode we'll again cover some of the takeaways from his 60th annual meeting. But, going back to Buffett's early days, where did he get his start, what was his background and how has his investment strategy or philosophy evolved over the years?

Mark Beaver :

So I'm not a Buffett biographer so I'll do my best to break it down based on what I've seen and read. But I think it's interesting that he says at a very early age he bought his first stock in 1942. Interesting year to start things out.

Mark Beaver :

But he also described in his early investment career that he was very much studying technical analysis, market timing strategies.

Mark Beaver :

He read tons of books on it, was practicing this a bunch and it took him several years to figure out that that was not the right approach to investing. A big thing that he credits to his style over time is Benjamin Graham, who's the author of the Intelligent Investor. So that was one of the things that really changed his perspective on how to purchase stocks. But the way he described that transition from very technical, heavy analysis was I stopped thinking about what stocks I was going to buy and started thinking about what businesses I was going to buy, and it's just a word change, but it's also a mental shift on what you're doing. It's not just buying the stock because I think it could go up, I'm buying a really good company and I want to own that very good company for a long time. So he said that was really a big change for him. But kind of coming out of that you know Benjamin Graham school, if you will his early adaptation of that was like you were describing value investing and Benjamin Graham's kind of thought it was the father of value investing, and so there was something he described as the cigar butt approach to stocks. You would be walking down the street and someone left a cigar butt on the sidewalk and you pick it up and you know get kind of a free partial cigar out of it. And so he's saying you know you run into that scenario where there's a company that's so low in price that how could you lose on that, you know? So that's what he was trying to find were these cigar butts. So I would think of that as not just value investing but maybe deep value investing, to use some jargon there but really, really low price. And he said you know, that worked for a time. But eventually he realized that and Charlie Munger, his longtime business partner, said this a lot too of it was better to buy good companies at a fair price instead of fair companies at a good price. So they weren't as focused on this has to be a super low price as long as it's a really, really good company. I don't really care so much about the price as long as I can own this great company for a long period of time. So that kind of evolved.

Mark Beaver :

And because people would sort of ask the question, he got these different styles of companies in their portfolio. You know why don't you own technology? You know in the 90s and 2000s and partially you'd say, well, I don't understand any of those companies, so I'm not going to invest in something that I don't have a good grasp on. Eventually they would. They are a very, very large shareholder of Apple now. So they have changed their perspective over time and maybe they understand that business a little bit more.

Mark Beaver :

But again, I think it kind of comes back to Apple is a huge cash-producing machine and they love cash-producing machines. They do it a little differently than maybe a railroad, you know? They're not getting dividends so much from something like that, but it's a lot of cash flow and it's something that that really piques their interest. But a lot of things have he stayed true to. You know, just from a investor in life philosophy, and he would say kind of to your point earlier, it's not so much about the intelligence of that investor, more so the temperament of that investor. Can you control yourself when things get tough? Can you make that good decision when it's hard to make? And he's been exceptional at that over the last 90 years.

Andy Keeler:

So you mentioned dividends, earnings. Clearly Buffett likes to invest in things that create income as opposed to relying on only the appreciation of the stock as the only means of making money. We covered that a little bit in episode five when we talked about gold and I think I also mentioned land. The idea with gold is it's a commodity and if you're buying gold outright, you're more're basically banking on the idea that that land is going to appreciate, and certainly it will. It's a limited commodity if you will. But if you put a gas station on that land, the gas station now you own the gas station on the land and that gas station has. So that's, that's kind of what buffett likes.

Mark Beaver :

Yeah, he, I think this was in one of their shareholder meetings, I don't remember the year. A few years ago he was remembering back again to the first stock he bought in 1942.

Mark Beaver :

He bought three shares of something and I don't know if he was like 12 years old at the time, so his dad had to do it for him and then partially it was a lesson on the longevity of his investments because he eventually made pretty good money on it. But he showed a chart of when he sold and if he would have just kept holding he would have made 5x what he sold at. So that was a big lesson for him of he sold too fast. But he said you can make a lot of money investing in stocks and you don't have to be an expert. Really, he said what if you just would have started investing at that same time in 1942? And you just bought a simple index like the S&P 500?

Mark Beaver :

Well, if you fast forward to today whenever he said this a few years ago, that ten thousand dollar investment would turn into 51 million dollars and it would be even more now because it's been up. You know even more since then. But instead if you you would have gotten you know and bought in the fear asset he says you know of gold, you could have bought 300 ounces of gold in 1942 with with ten thousand dollars, and you would have made about $400,000 from that.

Mark Beaver :

10,000. That's not terrible, I mean 10,000 to 400, but 10,000 to 51 million is very, very different. And so that was his point of saying it's nice that you could look at the gold that you have stored away in your safe, but it's just going to sit there and not produce anything. He wants to invest in things that produce for you. I think there was another quote out there where he said if you don't put your money in something that makes you money when you're sleeping, you're going to keep work. You'll have to work your whole life. You know so that production and income investment is something that's just totally ingrained in him.

Andy Keeler:

So another one of my favorite quotes. Games are won by players who focus on the playing field, not by those whose eyes are glued to the scoreboard. So that early lesson of selling that stock too soon, that's a trap that a lot of investors fall into the day trading he figured out early on that day trading market timing doesn't work. Stocks go up 75% of the time. The stopped clock is right twice a day. So those fear mongers, they're going to be right maybe 25% of the time. But the person that believes in the long-term performance of equities or owning companies, they're going to be right 75 of the time. I like those odds a little bit better.

Andy Keeler:

It's just a very simplistic sort of common sense way of looking at investments. One of my favorite purchases of his is Heinz ketchup and I mean it just kind of fits his Omaha, Nebraska farm country personality. Dull and boring. In the world of wrenches we have the crescent, in the world of mustard we have French's and in the world of ketchup we have Heinz. Buffett acquired Heinz in 2013. Perhaps he was inspired by Malcolm Gladwell's New Yorker article 11 years earlier titled the Ketchup Conundrum. Really good read. Anything Malcolm Gladwell writes is good, in my opinion, Gladwell's mastery of prose details how Heinz really is undeniably the best, and it turns out that Actually Heinz mustard is the best mustard too. But anyway, I digress. So Mark some other examples that Berkshire Hathaway has invested in companies that it owns. I know there's a railway in there, I think there's a steel company. Again, just American homegrown plain vanilla companies, nothing fancy.

Mark Beaver :

So Warren Buffett gets a lot of attention, rightfully so. So he's the CEO of Berkshire Hathaway, so that's where they're doing purchasing businesses and investing, and that's the company they do that through. And Charlie Munger, a longtime executive there as well. So they have a lot of subsidiaries under Berkshire Hathaway that a lot of folks don't even realize these are their companies because they really just operate as they are and they've talked about that. We don't want to come in here and make you us necessarily. We just want to help you do what you're doing really well. Make you us necessarily. We just want to help you do what you're doing really well.

Mark Beaver :

But there's a lot of these businesses. You mentioned one, bnsf the railroad, which you know my three boys are real, real excited about that. So they're pretty into trains right now and that's one of them, so that's pretty cool. Benjamin Moore paint is another one that they own. And then and then there's there's other ones that when you hear the names you don't necessarily recognize it. But then you go outside in the world and you're like oh yeah, I've, I've seen that. So they own McLean, which is a trucking company.

Mark Beaver :

You've probably seen their a very long list of things that they own, but these are very robust brands that they own. That was very popularized by Buffett and Munger called moats investing companies that have a moat, and so if you kind of envision a castle with that body of water wrapping around it for protection, they think of that as a representation of a company's competitive advantage in their marketplace. So they're saying there is something about that company that competitors cannot just come in and take their market share, and there's various ways of that. So it could be like a brand moat, you know. So the brand is so good Heinz, heinz, nike I don't know if they have the same brand moat that they used to, but still a very strong brand.

Mark Beaver :

There's things like switching cost modes. So if you think about a big corporation that has a Microsoft system that they're operating in under thousands of employees, for them to move from that to something else is a huge cost for them to do it. So they're probably going to be reluctant to make that change. So they're going to stay with Microsoft. They're going to stay with them. Kind kind of similar network effects.

Mark Beaver :

So you think about folks that are totally ingrained in the Apple system. You know they're using their, their phone, their iPad, their computer, their watch the TV, you know all the different things they have and it's just so a part of their life that if they stop it and got an Android, it would just wreck that network for them, you know. So that's a kind of a also sort of a switching cost element to that. So they look for companies that have some version, or maybe multiple versions, of these competitive advantages, because not only are they good today, but they're going to continue to be good 10 years from now. So that's, if you look at this collection of companies that are within Berkshire, or even public companies they invest in pretty much every time they're going to have some strong moats to them like that.

Andy Keeler:

I think early on I mentioned the idiot running a company and the idea that Berkshire can offer management consulting to these companies. So you know, if you, if you, own a business, how nice would it be, wouldn't it be a luxury, to have someone like Warren Buffett or Charlie Munger taking a look at your business and making recommendations as to how you make make it more profitable, more sticky, more difficult to change. And so when he's acquiring businesses as you said, he's buying businesses, not buying stocks he's typically buying majority interests in those businesses. So he has a controlling interest and by having that controlling interest he can help steer the company. Companies like Heinz may have a product that everybody absolutely loves, but they're having a hard time maybe getting their ketchup to market, maybe the packaging isn't attractive In a blind taste test, everybody wants it, but yet it's not rolling off the shelf. Someone like Warren Buffett can look at the business and say you know, maybe you should try doing this a little bit better. And in the event that there actually is an idiot at the helm, they can manage the company or run the company for the idiot. So now let's talk a little bit about his last meeting, so 60th annual meeting, in the question and answer portion of the meeting.

Andy Keeler:

One of the attendees asked why he doesn't invest in real estate. And you know I I mentioned it earlier in the gas station analogy. In the gas station analogy, and so you know off the cuff, my thought is well, don't invest in vacant real estate because it's not income producing. But certainly real estate encompasses commercial office buildings, warehouses, which do provide income. So why doesn't he invest in that? And his answer was really again, it's just so, it's common sense.

Andy Keeler:

The stock market, as you said, is a voting machine. So in real time, any minute of any day, there are millions of people voting on the value of a share of Apple or Amazon or Microsoft. With real estate, it's really what someone is willing to pay, or maybe a group of people. But unlike the stock market, where a deal can be consummated in seconds, if I want to buy $1 million of Apple stock, I can push a button, it's done. If I want to buy an office building, I've got to negotiate with the seller. That negotiation could take 30 days, it could take 60 days, it may never happen, and so I've wasted all that time and energy. There's an inspection process, so I inspect the building and I find it has mold. So there are all these again.

Mark Beaver :

It's just so simple that the reasons that he doesn't invest in certain things yeah, I would imagine he probably doesn't have a problem with people investing in real estate. At least they're investing, they're not just setting it aside and having it again not produce. It can produce for them, but that's just not something he knows and does. You know he stays in his lane, uh, which is a very successful lane for him. He likes businesses, he invests in businesses. You know it's kind of comes down to that. You know cause, even from the liquidity issues, these dozens of companies they own outright, like they're. They're not even public. They can't just sell those, you know, obviously, or when they bought them there were long transactions.

Mark Beaver :

But he knows businesses, he likes looking at financials, he likes looking at all these things and he has a deep passion for it. So he said, yeah, I'm fairly intelligent, I'm not the smartest guy in the world, but I took what intelligence I have and put it in something that I'm extremely passionate about and good things happen when you do those two things. He probably just isn't into real estate, you know. So he might say it's okay to invest in that. I just wouldn't do it. It's not my thing, you know. So obviously there's people that have made lots of money in real estate in various ways and in some off ways he has to. He owns companies that ensure real estate or sell real estate or, you know, do these different things around that industry. He just doesn't personally do it directly.

Andy Keeler:

So the timing of his 60th annual meeting coincided with a lot of we call it the T word, tariff talk, and so certainly folks were bound to ask the question what effect is that going to have on the economy, the market? We've talked in past episodes that the economy and the market are two different things, and then you have all the know, all the social issues that are sort of a third thing. In his usual fashion, he brought the conversation back around to really I could sum it up with my favorite Buffett quote, and that is for 240 years it's been a terrible mistake to bet against America and now is no time to start. Basically, said, we have always figured it out.

Andy Keeler:

And what's very interesting, uh, this recording is occurring in May, and early in the year we had about a 19% correction in the market, and the few clients that we did hear from, some of them made comments like my account's down 10%, and we would say you know, where are you seeing that? Because your account is actually only down at that time, 2%. What's really interesting is here we are in May and the market's what flat ish, yeah, despite the just onslaught of negative news.

Mark Beaver :

The just onslaught of negative news, and so you know, I think buffett is one to keep the faith yeah, I mean I I think he would subscribe to the idea that being an optimist is a good thing for for investors uh, especially over long periods of time, just looking back on some different Buffett videos and interviews and shareholder meetings and interesting things that he said a couple of different times and places. But he was saying you know, we're all better off today than we've ever been. I think we all can find reasons to feel like something's not good. Buffett say, when he was five or six years old, John D Rockefeller was the richest man in the world. So kind of crazy that he was alive when John D Rockefeller was alive. But he said all of us, for the most part, all of us have a better life than he did. Maybe not on a comparative basis, obviously he was the richest person. But he said you know, when you look at it today, all of us have a better quality of life than he did. We have better medicine, better education, we have better entertainment, we have better transportation. We have all of these different things, you have basically do everything better than the richest man in the world did when he was born, when Buffett was born, it's beautiful.

Mark Beaver :

And I think that's a great reminder, because there's just always a reason to say this thing is bad and this thing is bad, and in some ways there's always going to be something that can be changed and improved. But we do have a lot of really great things going on, like you said. So I think that's a nice way of looking at the world.

Andy Keeler:

As I mentioned kind of at the outset, what I wanted listeners to take away from today is just the very basic common sense. Mark, I think you mentioned temperament. You as an investor can be your own worst enemy, and Buffett himself admitted to selling something too soon. With that in mind, I think the question came up in the shareholder meeting what's next? And certainly there's a lot of speculation as to leadership what his family, his kids, will do after he passes. After he passes, if you had a crystal ball, what would you envision the future being for investors that want a Berkshire-like investment option? And what has he said? I've heard he said something to his wife about how she should invest after he passes.

Mark Beaver :

Yeah, that's an interesting thing to think about. I mean, he's been the CEO for so long and had such a long career. Hard to imagine Berkshire Hathaway without him. But at the same time it's not a one-person company and I'm sure the team that's there is very talented and ingrained in the same thought processes that him and Charlie Munger instilled in all of them. So I would guess that Berkshire continues to be, you know, a strong company going forward.

Mark Beaver :

But it's also interesting, there's not a bunch of Berkshire Hathaways, you know, out there. It's this publicly traded company, but it's sort of like a mutual fund, it's sort of like a private equity, like all these different things that you just don't see a lot of. And so there's something to what you know really the two of them created that is just apparently not that replicable out there in the world. And so you mentioned, you know, things he said about what his wife should do, and he's responded to questions like that and said well, if I was gone, I would tell her just to buy 90% of her portfolio in a low cost index fund and 10% in treasuries.

Mark Beaver :

It's like the most simple thing in the world, probably because, going back to that example where he said hey, if in 1942, you just would have bought the market as a whole and held it for a really long time, you made $50 million, you know. So you don't really need to think too hard about it. And so I think what he's saying is you know, maybe we can't all be Warren Buffett and replicate his you know his life, but we can all own a piece of that American enterprise that you described in one of his quotes of. We've made it through all of these things, we'll continue to make it through, so just invest in that, don't think too hard, and if you can hone it for a long time, you probably do pretty good.

Andy Keeler:

Kind of comes back to the notion don't invest in things you don't understand. Warren Buffett hasn't really invested directly in Bitcoin. He's invested in companies that are kind of around the cryptocurrencies, and we talked about that in a previous episode. It's again, you know, really just coming back to basics and not necessarily buying what your golf buddy is suggesting.

Mark Beaver :

Another really interesting thing talking about Buffett and things about after him is, you know, he's already come out and said that he's not just going to give all of this wealth to his family, vast majority of it. He's saying we'll go to charity and he's already started doing that now in a big way. So you know he doesn't want just all of this to go to them and have them just sit on that that wealth. So it's kind he doesn't want just all of this to go to them and have them just sit on that that wealth. So it's kind of interesting and he's challenged a lot of people publicly about it to do do similar things.

Andy Keeler:

So he's just a very philanthropic guy that he doesn't really live the billionaire lifestyle that you would think of, for for someone like that, you know, in talking about businesses that last for generations, in some cases it's not all that uncommon to see businesses fail in the second or third generation, because there's really no no fire in the belly and financially the third generation is in such great shape, they don't really have to work that hard. So, um, you know, it's commendable what Buffett is doing when he's trying to send a message that there are folks that are a lot more needy than his kids.

Mark Beaver :

I think most people would be all right with a couple percent of that estate anyway. Count me in.

Andy Keeler:

Thanks as always, Mark, and as always, we thank our listeners. Be sure to tune in next time when we discuss creative home financing options in what is still a fairly high mortgage rate environment. I'm Andy Kehler and this is Financial Opportunities Uncovered brought to you by Kehler and Now their Family Wealth. If you have questions on anything you heard in this episode or have an idea for a future episode, connect with us on LinkedIn.

Mark Beaver :

The opinions expressed in this program are for general information purposes only and are not intended to provide specific advice or recommendations. It is only intended to provide education about finance, tax, retirement and related planning topics. To determine which investment strategies are appropriate for you, consult your finance, tax or legal advisor prior to implementing. Any past performance discussed during this program is no guarantee of future results. Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always, please remember, investing involves risk and possible loss of principle. Please seek advice from a licensed professional. Keeler and Nadler Family Wealth is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Keeler and Nadler Family Wealth and its representatives are property licensed or exempt from licensure. No advice may be rendered by Keeler and Adler Family Wealth unless a client service agreement is in place. Thank you.