Warren Buffett's Investment Strategy

Warren Buffett is a legendary investor and businessman who is considered the greatest investor alive by many of his followers. His net worth was estimated to be $80 billion as of Oct. 2020. Investing was his calling from an early age. He started his investing journey at age 11 and he is still enthusiastic at age 90. His greatest influencer was Benjamin Graham, the promotor of Value Investing, and author of The Intelligent Investor. In his book, Graham has used the term Mr. Market to describe the market's behavior. Another Buffett influencer is Philip Fisher, an advocate of Growth Investment, and the author of Common Stocks and Uncommon Profits. Last but not least, Charlie Munger, Buffet's business partner had a great influence on Buffet.

Value Investing is the philosophy Warren Buffett has used in his investment methodology. Value Investing is a long-term investing in companies with strong earnings reports and high growth potential. Bargain hunting is the term that can describe Warren Buffet's investment strategy. He constantly researches businesses to identify those with a great value but a cheap price (undervalued stocks). A few pieces of advice by Warren Buffett is mentioned in the following:

  • Study deeply before you make an investment. Only invest in industries that you are familiar with. Read annual company's report, company debt, profit margins, and commodity reliance.

  • Employ Value Investing. Identify undervalued stocks of businesses with strong fundamentals and an excellent management team.

  • Know that there is a difference between Value and Price.

  • Be patient and have a long-term investment mindset.

  • Ignore most news because they are not informative.

  • Know the difference between private and public companies.

  • Choose stocks that pay dividends.

  • Study a company as a whole.

In the end, day-to-day fluctuations in stock price are not Warren Buffett's concern. He just rigorously study a company to understand it as a whole and its potential to generate revenue. A few of the most popular Warren Buffett's quotes are mentioned in the following:

  • "Price is what you pay. Value is what you get."

  • "Rule No. 1 is never lose money. Rule No. 2 is never forget Rule No. 1."

  • "You can't produce a baby in one month by getting nine women pregnant."

  • "The most important thing to do if you find yourself in a hole is to stop digging."

  • "Success in investing doesn't correlate with IQ ... what you need is the temperament to control the urges that get other people into trouble in investing".

  • "The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd."

  • "The stock market is a no-called-strike game. You don't have to swing at everything you can wait for your pitch."

  • "Cash ... is to a business as oxygen is to an individual: never thought about when it is present, the only thing in mind when it is absent"

  • "Buy into a company because you want to own it, not because you want the stock to go up".

  • "I just sit in my office and read all day."

  • "I insist on a lot of time being spent, almost every day, to just sit and think. That is very uncommon in American business."

  • "Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well."

  • "After 25 years of buying and supervising a great variety of businesses, Charlie and I have not learned how to solve difficult business problems. What we have learned is to avoid them."

  • "There is nothing wrong with a 'know nothing' investor who realizes it. The problem is when you are a 'know nothing' investor but you think you know something."

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