Cigar Butt Investing is No Longer Possible!?

In today’s world of seamless internet connections, 24/7 financial news, and globalization, it may seem as though every stone has already been turned. To the casual observer, the moment a company shows even a hint of cigar butt potential—cheap assets, distressed valuation, or hidden value—investors immediately pounce.

From the outside looking in, it’s tempting to conclude that cigar butt investing is dead. The common belief is that markets are efficient, opportunities are arbitraged away instantly, and therefore Warren Buffett’s early strategy of buying “cigar butts” (fair businesses at wonderful prices) can no longer work.

For years, I also fell into this mistaken belief. Cigar butt investing felt like a myth, mentioned only occasionally by Buffett himself before he shifted his focus toward “wonderful companies.” With little literature available, I assumed the strategy had been consigned to history.

But here’s the truth:

1. Markets are not efficient. Pockets of mispricing still exist—globally, and especially in Asia—where cigar butt opportunities continue to abound.

2. It’s a spectrum, not a binary. Companies fall along a continuum of quality and price. While Buffett eventually emphasized wonderful companies, his early returns were built on undervalued, overlooked businesses.

3. The literature is growing. Recent research shows cigar butt investing in practice. Brett Gardner’s Buffett’s Early Investments investigates the decades when Buffett earned his best returns, presenting real-world case studies.

The mistake, then, is assuming that opportunities no longer exist simply because they are harder to find. In truth, cigar butt investing remains possible—but it requires patience, effort, and a willingness to look where others aren’t.

For more on this overlooked approach, I recommend Gardner’s Buffett’s Early Investments. Click here to read reviews or purchase the book.