Warren Buffett and Charlie Munger: A Match Made in Heaven

Brookfield Renewable Partners could be an excellent pick as a stock that Buffett and Munger might pick as a long-term value investment.

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Warren Buffett and Charlie Munger are two of the most successful stock market investors of all time. The two also happen to be very good friends and have worked together over the years to achieve their success collectively.

Munger and Buffett have turned Berkshire Hathaway into one of the most valuable companies worldwide. Warren Buffett and his number two, Charlie Munger, are a match made in heaven.

If you are not aware of Buffett and Munger’s approach to investing, you might be surprised to learn that their strategy has been relatively simple throughout their careers. It is also possible for almost any investor to replicate their approach. However, we might rarely see any investors who can build such a large portfolio following their footsteps.

Investors interested in following their strategy, or who are just curious to know how these two have done it, can find out how. I’ll discuss their approach below.

Their value investing approach

Buffett and Munger seek to purchase high-quality companies when they are trading at fair or less than fair prices. It does not mean that Buffett buys up all the cheap stocks trading in equity markets worldwide without a second thought. The pair are also never going to pay a very high price for even the most attractive businesses.

Buffett and Munger specialize in identifying companies that have a competitive advantage over peers. It has to be something that qualifies the company as worth far more than its share prices at the time of purchase can reflect.

The two investors buy shares of companies trading for lower than their intrinsic values.

Long-term investing horizon

Purchasing stock at lower-than-intrinsic value is part of the strategy. The real billionaire-maker aspect of Buffett’s approach to investing has been holding on to his investments for decades. Charlie Munger and Warren Buffett don’t just search for stocks that can provide them with short-term returns. Rather, their goal is to invest in companies that can continue providing capital growth for several years.

The pair has also relied on compounding to turn attractive returns into a massive portfolio. The billionaire investors have performed well during the pandemic and several other market declines by adopting a buy-and-hold strategy. Using a similar approach is still possible. While it might not come from the same equity securities that Buffett owns, there are other opportunities you can consider.

A stock for a similar approach

Brookfield Renewable Partners LP (TSX: BEP.UN)(NYSE: BEP) is certainly an interesting prospect to consider for this purpose. Renewable energy will become the next big thing as climate change will gradually force fossil fuels out and push them into oblivion. Governments are already increasing focus on relying on renewable energy.

Brookfield Renewable Partners is one of the leading names in the industry that are set to be top players. We are already seeing a massive boost for renewable energy companies with the 2020 election win for Joe Biden in the U.S. Brookfield has seen its stock rise by almost 220% in the last two years. It also pays its shareholders dividends at a decent 2.54% at its current valuation.

Investing in the stock and holding it for the long run can help you leverage its capital gains for long-term wealth generation. Reinvesting dividends into the stock can help you unlock the power of compounding to accelerate your wealth growth to emulate the success that Buffett and Munger have enjoyed throughout their careers.

Foolish takeaway

Many investors try to buy the same stocks that Buffett and Munger invest in to build wealth. However, the true billionaire-maker stocks are the ones that are trading for a low valuation compared to the long-term potential. Brookfield Renewables is possibly one such stock that you can invest in to emulate Buffett’s success in the long run.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares) and recommends the following options: short March 2021 $225 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and long January 2023 $200 calls on Berkshire Hathaway (B shares).

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