Warren Buffett’s method of investing may prove to be a critical tool for families across Britain. With inflation sending food and energy prices skyrocketing, many households have been forced to dip into their savings to cover living costs. And, shockingly, an estimated 46% of Britons now have less than £1,000 of savings in 2024. And roughly 16% have nothing in the bank at all.
Sadly, there are no instant, short-term solutions to magically change these figures. At least, none that doesn’t involve an exceptional amount of risk. However, in the long run, following in Buffett’s footsteps could lead families into a significantly stronger financial position. Here’s how.
Learning from a legend
Today, Buffett’s one of the wealthiest men on the planet. But that wasn’t always the case. In fact, in his early life, he grew up in poverty before his parents eventually climbed into the middle class. And when he started his investment journey, he didn’t have much capital to get the ball rolling.
Despite these handicaps, he’s managed to create a fortune worth over $130bn in the space of one lifetime. Replicating this performance is far easier said than done. After all, many have tried and failed. But while it’s unlikely that an investor will manage to mimic his near-20% annualised returns, following his advice could still put individuals on the path of higher wealth.
When it comes to investing, even a small chunk of change can eventually compound into a significant sum of capital. So what’s the secret sauce?
It’s actually pretty straightforward – invest in wonderful businesses at fair prices and hold them for the long run. It’s a bit anti-climactic. But history has proven countless times that investing for the long term often yields some of the best returns while keeping risk in check.
What’s a wonderful business to consider today?
Finding a terrific company to buy and hold is obviously easier said than done. After all, if it was obvious, everyone would do it. Unfortunately, it’s quite a difficult question to answer due to the personal nature of investing. Everyone has different risk tolerances, time horizons, and general emotional temperament.
Having said that, one Buffett-style UK stock from my portfolio that may be worth exploring further is Games Workshop (LSE:GAW). Selling plastic miniatures may not sound like a lucrative business. Yet the company has grown into a multi-billion pound empire with enormous quantities of pricing power and a cult-like following from customers that puts Apple to task.
It’s ultimately translated into impressive double-digit profit margins, and its Warhammer brands, specifically Warhammer 40,000, are now the biggest in the global tabletop wargaming space. Of course, the firm isn’t without its risks.
The cost of plastic is rising courtesy of inflation and pressure from environmental regulations. So far, management’s been successfully passing on this expense to customers, maintaining profitability. But with a starter army box now priced at £95, the high cost of the hobby may already be prohibitively expensive for newcomers.
Nevertheless, that’s been a concern for years now. And demand continues to surge, despite the higher prices. Pairing this with a fair price-to-earnings (P/E) ratio of 22 compared to the group’s double-digit growth makes it a stock I’m happy to hold for long-term gains.
