It has now been over a decade since the financial crisis rocked U.S. markets. Some overleveraged and weaker companies didn't survive, while many companies with strong balance sheets and wide economic moats emerged from the crisis even stronger than they were when they went in.

One company in the latter category is Warren Buffett-led conglomerate Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B).

Here's a rundown of how Buffett may have seen the financial crisis coming; how he turned the economic turmoil into big profits for Berkshire; and how you can learn from Buffett's investment strategy to not only survive, but to take advantage of the next stock market crash.

Warren Buffett speaking with reporters.

Image Source: The Motley Fool.

Did Warren Buffett predict the financial crisis?

Sort of. Buffett didn't necessarily predict the crisis, in terms of timing and just how bad things would ultimately get.

Having said that, Buffett did offer some strongly worded warnings about the factors that triggered the financial crisis -- derivatives and housing.

In fact, in an unprecedented effort to warn investors about derivatives, Buffett pre-released a part of his 2003 annual letter to Berkshire's shareholders for publication in Fortune magazine. In the letter, Buffett called derivatives "financial weapons of mass destruction." A few years later, Buffett predicted that derivatives could make some other systematic problem much worse.

That problem would turn out to be housing, specifically the ease with which Americans could buy homes in those days. In 2005, Buffett remarked, "If you keep marking up something [housing], and in the process, the payment for the marked-up price comes from someone else who feel they are bearing no risk because they have the government guarantee in between, the money can just flood in, and everybody feels very happy for a long time."

By 2007, the tide had started to turn and foreclosures began to tick upward, but home prices remained elevated and credit remained easy. At Berkshire's annual meeting in 2007, Buffett simply warned that "you'll see plenty of misery in that field."

He was right. Easy mortgage lending combined with complex derivative securities nearly caused the U.S. financial system to collapse.

Buffett made serious money from crisis-era investments

One of the key components of Buffett's investment strategy is to be a buyer when everyone else is selling. And that was certainly true during and after the financial crisis.

Berkshire's rock-solid balance sheet allowed Buffett to make some particularly savvy investments in bank stocks like Goldman Sachs (NYSE:GS) and Bank of America (NYSE:BAC).

The latter resulted in a particularly big payday for Berkshire. Buffett invested $5 billion in Bank of America preferred stock in 2011 that paid a 6% annual dividend. In addition to his preferred stock, Buffett also received warrants to purchase 700 million shares for just $7.14 per share, which was about how much the bank's stock was trading for at the time.

Well, Buffett exercised Berkshire's warrants in 2017. As I write this, Bank of America trades for about $31 per share, making the value of Berkshire's shares (the company ended up with 679 million) about $21 billion -- a profit of roughly $16 billion in the seven years since the investment was made. Plus, the investment now pays Berkshire more than $400 million per year in dividends, which is substantially more than the preferred stock was paying.

Handle the next market crisis like Buffett

To be clear, the financial crisis is unlikely to repeat itself. The banking industry has undergone a major transformation and is far more stable than it was before 2008. So it's not very likely that the next market meltdown will be triggered by big banking institutions on the brink of collapse.

Having said that, another market crash will come at some point -- it's just a matter of when and what will cause it. I recently wrote an article about valuable lessons investors can learn from the financial crisis, and they are based on the same principles that allowed Buffett to invest so effectively during the crisis. To sum them up:

  • Don't panic and sell your stocks simply because the market is crashing. When times get tough, Buffett is invariably a net buyer of stocks. This is one of the reasons Buffett always insists on keeping billions of dollars in cash on the sidelines -- so he can take advantage during tough times.
  • Focus on best-in-breed companies trading at discounts. A great example was Buffett's investment in Goldman Sachs during the depths of the crisis. Buffett's reasoning was simple -- Goldman was the "best firm on Wall Street," and unlike many people, Buffett was very confident that the financial-industry bailout would ultimately be approved. He was right.
  • Don't try to time the market. Just because the market has crashed doesn't mean it can't go down more. It certainly can. Instead of trying to invest at the absolute lowest prices, focus on stocks you want to hold for the long term.
  • The financial crisis showed us that no stock or industry is completely immune. Back then, many investors had a disproportionate amount of their portfolio in financial stocks because they were thought to be safe. Don't make the mistake of thinking any of your stocks are crisis-proof. They aren't.

Here's the bottom line: As long as you keep a level head and approach a crisis from a long-term viewpoint as Buffett does, you should come out of it just fine, if not stronger than you went in.

Matthew Frankel, CFP owns shares of Bank of America and Berkshire Hathaway (B shares). The Motley Fool recommends Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.