Warren Buffett's Berkshire Compounded at More Than 19% a Year Over Six Decades, Nearly Double the S&P 500's 10% Return. Can Investors Still Apply That Playbook Today?

At the start of this year, Warren Buffett stepped down as Berkshire Hathaway's (NYSE: BRKA)(NYSE: BRKB) CEO and passed the reins to current CEO Greg Abel. Then, in September, Buffett stepped down as the chairman of the company's board of directors.

Sometimes called "the Oracle of Omaha" in reference to his birthplace and incredible history of investment success, the famously successful, 96-year-old moneyman is winding down his active participation with Berkshire. He's had a legendary run. Over roughly six decades, the Buffett-led investment conglomerate managed to post an average annualized return of roughly 19% -- nearly doubling the S&P 500's average annual return rate of roughly 10% across the stretch.

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To put things in perspective, if you had invested $5,000 in Berkshire and held it over a 60-year period, that investment would now be worth roughly $170.5 million. Meanwhile, the same buy-and-hold strategy with the S&P 500 would have grown your position to roughly $1.5 million across the same stretch. With that incredible performance difference in mind, can investors still rely on Buffett's playbook to deliver incredible, market-crushing returns?

Buffett's core philosophies remain invaluable, but don't ignore modern context

The importance of identifying strong businesses that are worth holding for the long term has been central to Buffett and Berkshire's incredible wins through the decades. Buffett believed that the stock market was an engine for transferring wealth from the impatient and overly active to those who were patient and had a long-term view and conviction in the strengths of their strategies. With regard to how that approach panned out for him, the proof is in the pudding.

Buffett's focus on backing strong businesses that traded at non-prohibitive valuations was central to Berkshire's success over more than six decades. As a student of value investing pioneer Benjamin Graham, Warren Buffett used valuation tools -- including discounted free cash flow analysis and return on equity -- to identify investment opportunities with risk-reward profiles that tilted dynamics in his company's favor.

On the other hand, Buffett's frame also foregrounded the importance of being willing to pay what looked like a valuation premium when a company's strengths could justify it. One of his most famous investing adages is that "it's better to buy a wonderful company at a fair price than to buy a fair company at a wonderful price." With a great company, that "fair price" has the potential to turn into wonderful value over time as the strengths of the business produce compounding results. This philosophy extended to both Berkshire's investments in publicly traded stocks and businesses that it acquired outright.

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But while Buffett's core philosophies and strategies delivered incredible results and remain valuable in today's environment, investors shouldn't expect to crush the market without making some adjustments. Berkshire's big wins over the last 60 years were heavily concentrated in sectors including consumer goods, banking, and energy -- and its stock has actually underperformed the S&P 500's total return over the last 10 years.

While strong companies in these sectors remain viable investment candidates, market dynamics over the last decade highlight the importance of backing winners in the tech sector in order to outperform an increasingly tech-heavy market.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.