How does he do it? Warren Buffett, one of the richest men in the world, seems to have the Midas touch when it comes to investing. But his style is really no secret at all. In 1965, he invested $10,000 in Berkshire Hathaway, and by the year 2005, his investments were worth nearly $30 million. In contrast, investing in Standard & Poor’s 500 would have yielded him around $500,000 for the same amount in investments. The sustained compound returns on his investments have made him a legend.

Warren Buffett’s investment strategy is founded on value investing. Value investors seek securities with prices below their intrinsic worth. When discussing stocks, distinguishing the intrinsic worth can be a challenge because there is no universally accepted way to figure it out. But for investors such as Warren Buffett, they are able to know a company’s value by looking at its fundamentals.

Similar to bargain hunters who want to find high quality underpriced goods, value investors looks for stocks that are underpriced. Warren Buffett takes his approach to a whole new level. While other investors don’t believe in the efficient market hypothesis, Buffett is not concerned about the supply and demand of these stocks. Instead, he buys stocks based on the potential of an organization to succeed.

This type of long-term view has paid off many times over for Warren Buffett. In today’s economic downturn where almost every investor worries because the value of her stocks decreases by more than half, Warren Buffet is not worried. He does not seek capital gain. Rather, he wants to own a certain portion of companies capable of generating profits in the long term. Now, this is the type of thinking that can make a person become a self-made billionaire.

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