Category: Warren Buffett

Warren Buffett recognizes that stock market prices periodically get disconnected from fundamentals. For Buffett, it’s both a caution and an opportunity.

“People get captivated simply by the notion of rising prices without going back to the underlying rationale. And that’s when you get very dangerous conditions in terms of possible bubbles,” Warren Buffett said at the 1997 Berkshire Hathaway Annual Meeting.

Buffett notes that this applies to the market’s extremes both going up and falling.

“It’s just people behave in extreme ways in markets,” he adds. “And over time, that’s very good for people that keep their heads.”

Buffett’s full explanation on bubbles and market extremes

See the complete Lessons From Warren Buffett series

© 2021 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

The news is full of headlines. On any given day the Federal Reserve is taking an action (or indicating that it won’t take any), trade relations are going well or going badly, or the IMF is making a prediction on economic growth. So, does any of this plethora of news matter to Warren Buffett when he makes an investment decision? Not in the slightest. “There’s always going to be good and bad news out there,” Buffett notes.

“We look to value, and we don’t look to headlines at all,” Warren Buffett said at the 2012 Berkshire Hathaway Annual Meeting. “If we find a business that we think we understand, and we like the price at which it’s being offered, we buy it. And it doesn’t make any difference what the headlines are. It doesn’t make any difference what the Federal Reserve is doing, and it doesn’t make any difference what is going on in Europe. We buy it.”

See Buffett’s full explanation

See the complete Lessons From Warren Buffett series

© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

If you look at the mistakes that investors commonly make, one is not truly understanding their investment, and another is leveraging a poorly understood investment through borrowing. Combining those two, as Warren Buffett points out, usually means that investors are really heading for trouble.

“Any time you combine ignorance and borrowed money, you can get some pretty interesting consequences,” Warren Buffett said at the 1994 Berkshire Hathaway Annual Meeting. “The ability to borrow enormous amounts of money combined with a chance to get either very rich or very poor very quickly, has historically been a recipe for trouble at some point.”

Hear Buffett’s full explanation

See the complete Lessons From Warren Buffett series

© 2022 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

There is a never ending stream of investment advice and opinion, and there are lots and lots of investing approaches, but one thing Warren Buffett is very clear on is that constantly changing your strategy based on what people are saying is not the path to wealth.

“You cannot get rich with a weather vane,” Warren Buffett said at the 1994 Berkshire Hathaway Annual Meeting. “Anytime I see some article that says, you know, these analysts say this or that about some business, it just, it doesn’t mean anything to us.”

Hear Buffett’s full explanation

See the complete Lessons From Warren Buffett series

© 2021 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

To some investors, “meme stocks” that are bid up to the stratosphere, or stocks with no earnings that have sky-high valuations, or other examples of wild speculation, are a warning sign that they should get out of the market, or at least move to a more conservative position. However, crazy behavior is not of great concern to Warren Buffett, and as he pointed out, long before meme stocks, that speculation is not a new part of the market and that he has seen an awful of it over the course of his lifetime. “We’re trying to find wonderful businesses. And the fact that a part of the market is kind of screwy, that’s unimportant to us,” Buffett noted.

“Throughout the careers Charlie and I have had in investing, there have always been hundreds of cases, or thousands of cases, of things that are ridiculously priced, and phony stock promotions, and the gullible being led in to believe in things that just can’t come true.” Warren Buffett said at the 1996 Berkshire Hathaway Annual Meeting. “So that’s always gone on. It always will go on. And it doesn’t make any difference to us.”

Hear Buffett’s full explanation

See the complete Lessons From Warren Buffett series

© 2021 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

There are lots of banks and they shouldn’t be treated the same when it comes to investing in the banking sector. Warren Buffett notes that there are lots of banks, and there are more banks than good bank management.

“We’ve also seen all kinds of banks ruined. I think it was, what was the fellow? M.A. Schapiro, who came up with the statement, he said, ‘There are more banks than bankers,’” Warren Buffett said at the 2002 Berkshire Hathaway Annual Meeting, quoting investment banker Morris Schapiro. “And if you think about that a bit, you’ll see what I mean. There have been a lot of people that have run banks in a very injudicious manner, but that’s made for opportunities for other people.”

Hear Buffett’s full explanation

See the complete Lessons From Warren Buffett series

© 2021 David Mazor

If you are a teenager dreaming of being a billionaire, and are wondering how you can become the next Warren Buffett, Buffett is happy to tell you what you need to learn and do. And it is good advice even if you are not still a teen.

“I definitely think you ought to learn all the accounting you can by the time you’re in your early twenties. Accounting is the language of business,” Warren Buffett said at the 1998 Berkshire Hathaway Annual Meeting. “Now, that doesn’t mean it’s a perfect language, so you have to know the limitations of that language, as well as all aspects of it. So I would advise you to learn accounting. And I would advise you to be, in terms of part-time employment or anything else, work at a number of businesses. There’s nothing like seeing how business operates to build your judgment in the future about businesses. You know, when you understand what kind of things are very competitive, and what kind of things are less competitive, and why that works that way, all of that adds to your knowledge.”

Buffett’s full explanation how to be the next Warren Buffett

© 2021 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Warren Buffett is such a legendary investor that it is easy to assume that it came to him so naturally that he was always successful. That actually wasn’t the case, according to Buffett.

“From eleven to nineteen, I was reading Garfield Drew, and Edwards and Magee, and all kinds of, I mean, I read every book, Gerald M. Loeb, I mean, I read every book there was on investments, and I didn’t do well at all. And I had no real investment philosophy. I had a lot of things I tried. I was having a lot of fun. I wasn’t making any money,” Warren Buffett said at the 2002 Berkshire Hathaway Annual Meeting. “And I read Ben’s book (Benjamin Graham’s The Intelligent Investor) in 1949 when I was at University of Nebraska, and that actually just changed my whole view of investing. And it really did, basically, told me to think about a stock as a part of a business. Now, that seems so obvious. You can say, you know, that why should you regard that as the Rosetta Stone? But it is a Rosetta Stone, in a sense.”

Buffett’s full explanation on the books he read that molded his investing philosophy

See the complete Lessons From Warren Buffett series

© 2021 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Beta, the measurement of a stock’s volatility, is not a measurement of riskiness, according to Warren Buffett. Although many investors are taught that high beta stocks have more potential for gain but also a higher risk of loss due to their volatility, Buffett disagrees.

“It became very fashionable in the academic world, and then that spilled over into the financial markets, to define risk in terms of volatility, of which beta became a measure, but that is no measure of risk to us,” Warren Buffett said at the 1994 Berkshire Hathaway Annual Meeting. “Interesting thing is that using conventional measures of risk, something whose return varies from year to year between plus-20 percent and plus-80 percent is riskier, as defined, than something whose return is 5 percent a year every year. We just think the financial world has gone haywire in terms of measures of risk.”

Hear Buffett’s full explanation

See the complete Lessons From Warren Buffett series

© 2021 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.