Whether or not you're a Warren Buffett fan, there's no doubt that he's one of the greatest investors of all time. The CEO of conglomerate Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) has grown his net worth from around $10,000 to $80 billion since the 1950s, and has delivered a compound annual return for Berkshire Hathaway's shareholders of 20.3% since 1965. A $100 investment in Berkshire back in 1965 would be worth more than $2.5 million today.
Buffett's success is primarily attributed to his ability to spot businesses with sustainable competitive advantages, as well as his persistence to stick with his holdings over long periods of time.
But this only tells part of the story. Buffett's outperformance is also a direct reflection of his unwillingness to buy into the idea of traditional investment diversification. The Oracle of Omaha doesn't believe in diversifying if you know what you're doing. By sticking with companies in industries and sectors he knows very well, Buffett has amassed a long history of outperformance.