Warren Buffett retired after 60 years at Berkshire Hathaway, leaving behind a $5.5 million return on a $100 investment in 1965. Research by Kai Wu challenges the notion that Buffett was a traditional value investor, revealing he paid premiums for quality businesses like Geico, Coca-Cola, and Apple at significant multiples of book value.

Wu identified three eras in Buffett’s evolution: Industrial (1950s-1970s), Consumer (1980s-2000s), and Information (2010s-2020s). The shift from tangible to intangible assets drove Buffett’s investment decisions, culminating in his massive Apple position. Analysis shows intangible assets now dominate Berkshire’s portfolio, reflecting the changing nature of value creation in the modern economy.

Buffett’s outperformance over the S&P 500 can be largely attributed to factors like intangible value, quality, and traditional value, rather than stock-picking skill. Wu’s research reveals that systematic, factor-based investing played a significant role in Buffett’s success, highlighting the importance of understanding and applying these factors in investment strategies.

The relationship between intangible value and quality factors lies in identifying companies with strong moats built on intangible assets, capturing both current profitability and future growth potential. Investing based on these factors can replicate Buffett’s returns since 1978 and provide a systematic approach to identifying companies with durable competitive advantages.

Investors can learn key takeaways from Wu’s research, including the importance of intangible assets, the need to update traditional value investing metrics, and the challenges of scale faced by large investors like Berkshire. By applying factor-based approaches to identify companies with high intangible value and quality scores, investors can capture the essence of Buffett’s philosophy in a systematic and accessible manner.

As Greg Abel takes over at Berkshire, facing challenges in a high valuation environment, individual investors can apply Buffett’s principles of intangible value and quality across global markets. By understanding and applying these principles systematically, investors can capture the essence of Buffett’s success and adapt to the evolving economy, leveraging his framework for identifying durable competitive advantages.

Read more at Morningstar: Warren Buffett Was Never Just a Value Investor. Here’s the Real Secret to His Investing Success