How to get started with value investing
Value investing can build wealth over generations. Discover how Warren Buffett used it to grow his billions – and how you can apply the same strategy to your portfolio.
If you want to learn how to do value investing, there’s no better place to start than Warren Buffett. For decades, Buffett has shown that buying great companies at fair prices – and holding them over the long run – can build enormous wealth.
That’s because value investing isn’t just a way to pick stocks: it’s a proven wealth building strategy. By focusing on businesses with durable advantages, steady earnings, and reasonable valuations, investors can create a portfolio designed to compound over time. It’s not about chasing market noise, but about laying a foundation for long-term financial growth.
But what does that look like in practice? Here’s some real-world lessons drawn from Buffett’s own portfolio.
How does Warren Buffett approach value investing?
Value investing isn’t about watching charts or guessing the market’s next move. It’s about thinking like a business owner. Buffett says he buys shares with the mindset of holding them over years and decades.
His focus is on the underlying company: what it sells, who it sells to, how it makes money and whether it can generate cash year after year.
That mindset is critical. Businesses that consistently grow earnings can reinvest in themselves, pay dividends, and compound shareholder value over decades. Thinking like an owner gives your investments time to do the heavy lifting.
🎓 Learn more: How to tell if a stock is undervalued or overvalued?→
What can value investors learn from Warren Buffett’s portfolio?
Buffett’s investments offer plenty of real world examples of value investing in action. Let’s look at three case studies – and the valuations he paid when he entered.
How Buffett invested in Coca-Cola ($KO)
Buffett’s Berkshire Hathaway ($BRK.B) first bought Coca-Cola shares in 1988, investing about US$1.3 billion at a P/E ratio of roughly 15x while the stock market was still reeling from 1987’s Black Monday crash.
Coca-Cola’s share price had slumped and many investors assumed its best growth days were behind it. Coca-Cola was viewed as a mature, slow-moving company.
Yet Buffett saw things differently. To him, Coca-Cola wasn’t just a beverage – it was a global brand machine with the potential to sell happiness in a bottle around the world.
Why it made sense:
Coca-Cola was one of the world’s most recognisable brands, giving it unmatched pricing power.
It sold a simple, low-cost product with universal demand, making it resilient in recessions.
Its global distribution network meant Coca-Cola could scale in developing markets, creating long-term growth tailwinds.
The company had strong free cash flow and a shareholder-friendly dividend policy, ensuring steady returns.
Wealth building lesson:
Buffett’s investment has been a textbook example of compounding. Coca-Cola has paid Berkshire billions in dividends, including US$700m in 2024, a nice yield on the original US$1.3b investment. In turn, this helps fund other investments
Coca-Cola shows that when you buy a world-class brand at a fair price – even if it appears unglamorous – time and compounding can do extraordinary work.
How Buffett invested in Apple ($AAPL)
Buffett started buying Apple in 2016, when it was trading at a P/E of only about 12x, far below today’s tech multiples. Market sentiment was mixed: analysts worried about iPhone sales growth and competition from Android.
But Buffett didn’t see Apple as a tech stock. He saw a consumer products giant with a sticky ecosystem loved by loyal customers –similar to Gillette razors or Coca-Cola than to traditional Silicon Valley firms: products people used every day and kept coming back for.
Why it made sense:
Apple’s devices and ecosystem created lock-in – once customers bought an iPhone, they were more likely to buy AirPods, Macs, Apple Watches, and subscribe to services.
Its services segment (App Store, iCloud, Apple Music) created predictable, recurring revenue.
Apple’s loyal customer base gave it one of the strongest brands in the world.
Enormous free cash flow allowed Apple to return money to shareholders through dividends and massive share buybacks.
Wealth building lesson:
Apple shows that value investing isn’t about avoiding growth – it’s about paying a fair price for a durable competitive advantage. Buffett’s Apple stake quickly became Berkshire’s largest holding and has delivered billions in returns.
By looking past market fears and recognising Apple as a consumer powerhouse, Buffett demonstrated how value investing adapts – even in the tech age – when decisions are anchored in fundamentals and long-term compounding.
How Buffett invested in UnitedHealth Group ($UNH)
Berkshire added UnitedHealth in 2025, buying more than 5m shares for about US$1.6 billion. The stock had nearly halved over the prior year, trading on a P/E of around 14x – well below the 20x multiple it once commanded.
The company had been battered by soaring medical costs, regulatory scrutiny, a Department of Justice investigation into Medicare billing, a damaging cyberattack, and even the tragic death of an executive in 2024.
Investors fled, and the stock lost its premium valuation. To many, UNH looked toxic. To Buffett, it looked cheap.
Why it made sense:
UNH still had scale advantages as the largest private health insurer in the world, combining its insurance arm with its Optum services business.
Despite shrinking margins – operating earnings dropped from US$7.9b to US$5.2b in Q2 2025 – the company still generated massive revenue, topping US$111.6b in a single quarter.
UNH continued to reward shareholders, raising its dividend by 5% in 2025 and returning US$4.5b through dividends and buybacks in Q2 alone.
Stephen Hemsley, the former CEO credited with building UNH into an industry titan, returned to reset pricing, restore cost discipline, and rebuild trust.
Wealth building lesson:
UnitedHealth is a case study in Buffett’s philosophy of being ‘greedy when others are fearful’.
UNH is a prime example – a dominant franchise on its sickbed with deep moats and long term potential
Buffett bet that temporary setbacks wouldn’t erase long-term strengths. For long-term investors, it shows how value can sometimes be found in fallen blue chips that are temporarily out of favour but have the capacity to recover and compound wealth over decades.
🎓 Learn more: How to research stocks?→
Warren Buffett’s value investing approach at a glance
Company | Entry P/E ration | Competitive advantage | Wealth building lesson |
|---|---|---|---|
Coca-Cola | ~15× (1988) | Global brand, universal demand, pricing power. | Dividends and reinvestment can make boring stocks compounding machines. |
Apple | ~12× (2016) | Loyal customers, recurring revenue, huge cash flow. | Growth stocks can be value plays at fair prices. |
UnitedHealth | ~14× (2025) | Scale in insurance and healthcare, strong demand. | Fallen blue chips can bounce back to deliver long-term compounding. |
How investors can get started with a value investing approach
You don’t need billions to begin investing like Buffett. Here’s a simple approach:
1.Start with what you know
Look at businesses whose products you use and understand. Blue-chip companies that are potentially temporarily beaten down by short-term challenges but still have strong long-term prospects are a good place to start. Read their earnings reports. Study how they make money.
2. Focus on the Fundamentals
Instead of chasing short-term share price swings, look at:
Consistent profits.
Strong brand or market position.
Healthy balance sheet (manageable debt).
Reasonable valuation: ask is the P/E ratio below its historical average or industry peers?.
Part of this process involves calculating key investment metrics like the P/E ratio, debt levels, and cash flow. This can help you spot undervalued stocks.
3. Be Patient
Value investing is about decades, not days. Don’t expect overnight results. Remember Buffett’s advice: ‘The stock market is designed to transfer money from the active to the patient.’
💡Related: Renowned value investor, Warren Buffett and his holdings→
Common pitfalls to avoid when getting started with value investing
Copying portfolios blindly. Buffett’s size, timing, and access are unique. Learn from him, but make decisions based on your own knowledge.
Over-diversifying. A few well understood companies are better than many you know little about.
Chasing hype. Just because a stock is popular doesn’t mean it’s a good value.
The takeaway for would-be value investors
Value investing doesn’t require complex strategies. It starts with a mindset: think like an owner, focus on businesses with enduring strengths, and be patient.
What makes value investing so powerful as a wealth-building strategy is the compounding effect.
Buffett’s investments in Coca-Cola, Apple, and UnitedHealth show this in action. He didn’t just buy shares – he bought businesses he believed were positioned to thrive for decades, and he held on long enough for compounding to do its work.
This is not financial advice nor a recommendation to invest in the securities listed. The information presented is intended to be of a factual nature only. Past performance is not a reliable indicator of future performance. As always, do your own research and consider seeking financial, legal and taxation advice before investing.
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Samy is a markets analyst at Stake, with seven years of experience in the world of investing, working across roles in private banking, venture capital and financial media. She has a Master’s degree in Finance and Data Analytics from The University of Sydney Business School.
