2 Warren Buffett-style stocks to help you make a million

Warren Buffett is one of the world's wealthiest people and probably the most respected investor of all time.

Throughout his career, Buffett has made billions investing in undervalued stocks and unloved industries, but there's one sector where he's made more money than anywhere else.

Cash cow

Insurance is Buffett's favourite industry for many reasons, the most important of which is the industry's profitability. Over the years his Berkshire Hathaway has made billions selling insurance products and then reinvesting the proceeds. The good news is, investors like us can also benefit from insurance's lucrative traits.

Beazley(LSE: BEZ) has produced double-digit returns for investors over the past four years. Last year the stock generated a total return of 25.7% following a performance of 2% in 2016, 34.6% in 2015 and 15.4% in 2014. Following these gains, £1,000 invested at the beginning of 2014 would today be worth approximately £1,980.

It looks as if these lofty returns are set to continue. Today the company announced that, following a profitable year, management "anticipates pre-tax profits for the year ended 31 December 2017 that will be ahead of current market expectations." Even though 2017 saw some of the worst natural disasters recorded for some time, forcing more than $300bn of losses on the insurance industry, Beazely still expects to make a profit for the year with an estimated combined ratio of 99% (a ratio of less than 100% implies an underwriting profit).

City analysts had been expecting the company to report earnings per share of 20p on a net profit of $147m for 2017. For 2018, analysts are expecting a net profit of $264m and earnings per share of 34p (at current exchange rates). Based on these forecasts, the shares are trading at a forward P/E of 15.3, which is around the industry average. The shares also offer a dividend yield of 2.8%, and the payout is expected to grow in line with earnings.

So overall, considering Beazley's historical performance, and impressive performance this year against a turbulent backdrop, I believe the company could be a great addition to your portfolio.

Special payouts

Another insurance stock I'm positive about is Direct Line Insurance(LSE: DLG). This is a personal and small business general insurer, so it operates in a different segment of the market to Beazley, which is less exposed to global catastrophes.

This means the group's cash flows are a bit more predictable, supporting larger cash distributions to investors. Since its IPO in 2013, Direct Line has returned 133.3p to investors via regular and special dividends equivalent to around 57% of its 233p IPO price.

And it looks as if Direct Line will remain a dividend champion for the foreseeable future. Last year the company didn't make a special payout, but for fiscal 2017, analysts are expecting a total distribution of 29.3p, including the 6.8p already paid. Based on this estimate, the shares are trading with a projected yield of 7.9% and at a forward P/E of 11.8.

If Direct Line continues to return excess cash to investors and grow earnings, it's not unrealistic to suggest that the group could produce a total return of 10% or more per annum (7% from income and 3% earnings growth, the average of the last five years) going forward -- essentially doubling investors' money every 7.2 years.

Want to achieve Buffett-like returns?

Insurance can be a highly lucrative industry and insurance businesses such as Beazley and Direct Line can really add a kick to your portfolio.

For more tips on how to achieve Buffett-like returns, I highly recommend that you take a look at this free report titled The Foolish Guide To Financial Independence.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK owns shares of and has recommended Berkshire Hathaway (B shares). Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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