Why You Can Make 50% Returns (And Wall Street Can't)
Warren Buffett guaranteed 50% returns on small sums. Here is the blueprint for doing what Wall Street can't.
Warren Buffett dropped a truth bomb years ago that most investors have forgotten. It was about the curse of managing too much money.
“If I was running $1 million today, or $10 million for that matter, I’d be fully invested... I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that.”
Read that again. A guarantee of 50% annual returns.
Why can’t he do that today with Berkshire Hathaway? Because size is gravity.
Wall Street giants are shackled by mandates, liquidity constraints, and “career risk.” A fund manager running billions cannot buy a $50 million company; they would own the entire thing just trying to build a starter position. They are terrified of deviating too far from their benchmark (like the S&P 500) because they fear clients pulling capital the moment they underperform for a quarter.
They are forced to play a defensive, average-seeking game.
We don’t wear those chains. As tiny retail investors, you and I possess the very advantages that young Buffett used to build his initial fortune.
We have Agility: We can enter and exit positions in minutes without moving the market against ourselves.
We have Patience: We don’t answer to a nervous board of directors or jittery Limited Partners demanding quarterly results.
We have Freedom: We can buy the absolute best ideas, regardless of their market cap or inclusion in an index.
The mistake most retail investors make is trying to mimic giant institutions. They buy the same mega-cap tech stocks and diversified ETFs. That’s fine for average returns, but it won’t get you the 50% Buffett talked about.
To get those returns, you have to stop playing their game and start playing yours. You have to play where your size is your superpower.
Here is the actionable playbook for investing like the young Warren Buffett.
The “Young Buffett” Playbook: 4 Rules for Hyper-Returns
Achieving massive returns requires accepting a simple truth: You must do what institutional investors physically cannot do, and you must do what lazy retail investors won’t do.
1. Fish in Forgotten Ponds (The Microcap Edge)
If you have $50,000 to invest, why on earth are you looking at Microsoft? There are thousands of analysts dissecting every penny of Microsoft’s earnings. Your odds of having an informational edge there are near zero.
Young Buffett made his killing in microcaps, nano-caps, and obscure securities—companies with market capitalizations under $300 million, sometimes under $50 million.
Institutions cannot touch these stocks. Their compliance departments won’t let them, and their position sizes are too big. These stocks are often illiquid and have no analyst coverage. This is where pricing inefficiencies run wild.
Actionable Steps:
Use a Screener aggressively: Set your stock screener to filter out anything with a market cap over $500 million.
Look for “Dark” Stocks: Investigate companies that don’t hold flashy earnings calls or get mentioned on CNBC. Look for boring businesses in niche industries—gravel pits, small insurance operations, obscure parts manufacturers—that are quietly printing cash.
Accept Illiquidity: You might buy a stock that only trades a few thousand shares a day. That terrifies a hedge fund manager. It shouldn’t scare you. If the business is worth double the current price, who cares if it takes you three days to buy your full position?
2. Turn Over More Rocks (The Sweat Equity)
When asked how to emulate his success, Buffett once held up stacks of annual reports and said, “Read 500 pages like this every day. That’s how knowledge builds up, like compound interest.”
Most people use screeners to find stocks based on P/E ratios. Young Buffett read the footnotes. He found value hidden in assets recorded at historical cost, overlooked subsidiaries, or complicated liquidation scenarios.
Actionable Steps:
Read the 10-K, not the summary: Pick one obscure company a week and read its entire annual report (Form 10-K) from front to back. Do not rely on Yahoo Finance summary data; it is often wrong for small companies.
Start at A: Buffett famously read the Moody’s Industrial Manuals from start to finish, looking for companies trading below their liquidation value. You can do the modern equivalent. Pick a sector that hated right now and start turning over every rock in that sector, alphabetically.
Look for “Cigar Butts”: This was Buffett’s early strategy. Find mediocre companies trading so cheaply (below net current asset value) that there is “one good puff” left in them before they are liquidated or sold.
3. Embrace Concentration (Bet Big When You’re Sure)
Modern portfolio theory teaches crazy diversification to protect wealth. But diversification is also an anchor on outsized returns.
If you do the deep work to find an incredible opportunity—a microcap trading at 4x earnings with no debt and a catalyst for growth—why would you put only 2% of your portfolio into it?
Young Buffett was highly concentrated. When he had high conviction and a massive margin of safety, he bet big. If you want 50% returns, your best idea needs to matter to your portfolio’s bottom line.
Actionable Steps:
Know what you own: Only concentrate if you have done the “turn over rocks” research phase. Concentration without deep knowledge is just gambling.
The 5-Punch Card: Imagine you only get to make 5 investments in your entire life. How carefully would you vet them? Adopt this mindset. A portfolio of 5 to 10 extremely high-conviction ideas is far more likely to generate massive alpha than a portfolio of 50 lukewarm ones.
4. Exploit Institutional Timeframes (Time Arbitrage)
This is your greatest psychological edge. Institutional investors are forced to be short-term thinkers. If a stock drops 30% in a quarter, a fund manager might be forced to sell it to window-dress their portfolio before reporting to clients, even if they know the stock is cheap.
You can engage in “time arbitrage.” You can buy the assets that institutions are forced to vomit up during temporary panics or sector rotations.
Actionable Steps:
Buy Spinoffs: When a large company spins off a small, messy division, big index funds are often forced to sell the new shares immediately because the new company is too small for their mandate. This creates massive, temporary selling pressure unrelated to the business’s quality. Young Buffett loved these special situations.
Welcome Volatility: When the market tanks, institutions face redemptions and have to sell their best, most liquid holdings to raise cash. You don’t have redemptions. That is when you deploy your cash.
The Warning Label
Aiming for 50% returns is not a casual hobby.
It is intellectually grueling and emotionally taxing. You will experience wild volatility in your portfolio. You will buy things that go down 40% before they go up 200%. You will have to read boring documents while your friends are watching Netflix.
If you try to get 50% returns by trading options or chasing meme stocks, you will likely go broke. But if you try to get them by acting like a forensic accountant in the microcap space, you are playing the only game where the little guy actually has the advantage.
Stop trying to beat Wall Street at their game. Start playing the game they aren’t allowed to show up for.
Disclaimer: The content of Atomic Moat is for educational and entertainment purposes only and does not constitute financial, investment, or legal advice. I am not a financial advisor, and these are not recommendations to buy or sell any security.
Risk Warning: Investing in equities, especially in the technology sector, involves a high degree of risk. The market is irrational, and prices can fluctuate wildly. Please do your own due diligence (DYODD) and consult with a certified professional before making any investment decisions.
That’s what try to tell myself everyday. But going into unknown territory and being patient over a long period of time is very nerve-wrecking. Questioning yourself is a daily routine. But once a stock skyrockets that’s where you actually realize that what you’re doing is right. But before that- it’s a struggle. Even though i experienced multiple stocks giving high returns, i also had stocks that went nowhere. I think that the most important factor in investing successfully is about trusting yourself and going regularly over your investment thesis.