19e best and most well known investor since 1965 has been the sage of Omaha or Warren Buffett. Mr. Buffett’s company Berkshire Hathaway has generated 10 times the return of the S&P 500 Index. However since 1998 it has performed about the same. In the Globe and Mail, Ian McGugan offered his opinion.

What made Mr. Buffett successful in the first place?  A company called AQR based in Greenwich, Conn reversed-engineered the returns in 2012. In concluded Mr. Buffett largely a matter of consistently buying cheap, safe, quality stocks and then adding a hefty dollop of financial leverage or using other people’s money.

One of the holdings of Berkshire Hathaway is insurance companies including Geico, Mr. Buffett figured out how to structure his investment vehicle to employ generous amounts of leverage of the insurance float. Insurance float is the difference between the premiums the company collects from insurance holders and the claims it pays out. The float provides an inexpensive source of funds that allows Berkshire to amplify the returns from cheap, safe, quality stocks.

The questions for investors in the future is because Berkshire Hathaway is large will the returns continue or if you buy the notion that Berkshire is really just a cleverly constructed machine for making leverage bets on a few key factors – cheap, safe and quality stocks, it may be good to buy the company.

Linking to dividend paying stocks, most of us do not have access to cheap money, once in while you do, but most of the time we do not. However, staying with cheap, safe and quality stocks is a very good thing. If you go back 25 years to see what companies were the largest in Fortune 500 and take a look at them now, many would be different. It is a challenge to invest in cheap, safe and quality stocks, but if you do there are many rewards.

There are more questions than answers, till the next time – to raising questions.