Investing can be such an active process that it is easy to forget that you don’t have to do anything. It is a point that Warren Buffett makes when he notes that the stock market gives you a constant stream of prices that you can buy or sell at, but you don’t have to accept them.
“The stock market is the most obliging, money-making place in the world because you don’t have to do anything,” Warren Buffett said at the 2012 Berkshire Hathaway Annual Meeting. “You know, you sit there with thousands of businesses being priced at the same price for the buyer and the seller…and it changes every day, and you’ve got lots of information about most of those businesses, and you don’t have to do anything.”
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.
Too many investors focus on price to make their investing decisions. When a stock drops substantially from its all-time high, to them it has become cheap. However, Warren Buffett reminds us that long term investing success is based on buying companies based on what they are worth, not based on the prices they are selling for on any given day.
“The important thing is that you make your decisions based on what you think the business is worth,” Warren Buffett said at the 2012 Berkshire Hathaway Annual Meeting. “And if you make your buy and sell decisions based on what you think a business is worth, and you stick with businesses that you’ve got good reason to think you can value, you simply have to do well in stocks.”
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 doesn’t just see stocks as a series of buy and sell prices that are constantly being offered. He always looks at investing as an opportunity to buy a business, whether it is buying the whole business or just a small number of shares.
“It’s very important to have that mindset that we are buying businesses, whether we’re buying 100 shares of something or whether we’re buying the entire company,” Warren Buffett said at the 2013 Berkshire Hathaway Annual Meeting. “We always think of them as businesses.”
Buffett’s full explanation on evaluating the qualitative and the quantitative properties of a business
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 a 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.
One of the most influential books the young Warren Buffett read was Benjamin Graham’s The Intelligent Investor. Buffett has called it “By far the best book on investing ever written.”
In chapter 8 of the book, Graham famously anthropomorphizes the actions of the stock market into the erratic “Mr. Market.” Graham wrote that sometimes the prices for stocks that Mr. Market quotes are reasonable, but sometimes “Mr. Market lets his enthusiasm or his fears run away with him, and the value he proposes seems to you a little short of silly.”
“It’s a marvelous game,” Warren Buffett said at the 2012 Berkshire Hathaway Annual Meeting. “The rules are stacked in your favor, if you don’t turn those rules upside down and start behaving like the drunken psychotic instead of the guy that’s there to take advantage of it.”
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 are songwriter and you copy somebody else’s song, you are going to get sued for plagiarism. However, when it comes to investing, there is no downside to copying someone else’s strategy, as long as you understand it. Warren Buffett credits reading Benjamin Graham’s The Intelligent Investor and Phil Fisher’s Common Stocks and Uncommon Profits for many of his ideas.
“I think you can learn a lot from other people,” Warren Buffett said at the 1995 Berkshire Hathaway Annual Meeting. “In fact, I think, if you learn reasonably well from other people, you don’t have to get any new ideas or do much on your own. You can just apply the best of what you see.”
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 living proof that you don’t have to spend your energy timing the stock market to be a successful investor. As Buffett notes, “we haven’t the faintest idea what the stock market is going to do when it opens on Monday.” For Buffett, more important than trying to time the market, is recognizing when a particular stock is undervalued.
“I totally missed, you know, in March of 2020,” Warren Buffett said at the 2022 Berkshire Hathaway Annual Meeting. “We have not been good at timing. We’ve been reasonably good at figuring out when we were getting enough for our money. And we had no idea when we bought anything (well, we always hoped it would go down for a while so we could buy more) and we hoped even after we were done buying and ran out of money that if it was cheap the company would keep buying, in effect, taking our interest up. I mean, that’s stuff you can learn it in fourth grade. But it’s not what’s taught in school.”
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 so many public companies, each producing an annual report, that it can overwhelming as to where to start if you want read annual reports. Warren Buffett uses a very simple approach, he starts with reading the reports of companies that he understands and avoids the rest. How valuable is an annual report? Buffett believes it has all you need to know in order to decide whether to buy a stock. He cites his purchase of Coca-Cola stock as a prime example.
“We start by looking at the reports of companies that we think we can understand,” Warren Buffett said at the 1998 Berkshire Hathaway Annual Meeting. “And then we see from that report whether the management is telling us about the things that we would want to know about if we owned a hundred percent of the company. . . . For example, I would say that the Coca-Cola annual report over the last good many years is an enormously informative document. I mean, I can’t think of any way if I’d have a conversation with Roberto Goizueta, or now Doug Ivester, and they were telling me about the business, they would not be telling me more than I get from reading that annual report. We bought that stock based on an annual report. We did not buy it based on any conversation of any kind with the top management of Coca-Cola before we bought our interest. We simply bought it based on reading the annual report, plus our knowledge of how the business worked.”
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.
Is there a best time to start saving? Warren Buffett says there definitely is.
“Any money you save before you get out and start having a family … any dollar is probably worth $10 later on simply because you can save it,” Warren Buffett said at the 1998 Berkshire Hathaway Annual Meeting. “The time to save is young, and you’ll never have a better time to save than really, pre-formation of a family. Because the expenditures come along then whether you like them or not.”
Buffett’s full explanation on the best time to start saving
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.
Aesop, the legendary storyteller of antiquity, had one of the most important lessons for investors in his fables, according Warren Buffett.
“The first investment primer that I know of, and it was pretty good advice, was delivered in about 600 B.C. by Aesop. And Aesop, you’ll remember, said ‘A bird in the hand is worth two in the bush,’” Warren Buffett said at the 2000 Berkshire Hathaway Annual Meeting. “Now, Aesop was onto something, but he didn’t finish it, because there’s a couple of other questions that go along with that. But it is an investment equation, a bird in the hand is worth two in the bush. He forgot to say exactly when you were going to get the two in the — from the bush — and he forgot to say what interest rates were that you had to measure this against. But if he’d given those two factors, he would have defined investment for the next 2,600 years. Because a bird in the hand is, you know, you will trade a bird in the hand, which is investing. You lay out cash today. And then the question is, as an investment decision, you have to evaluate how many birds are in the bush. You may think there are two birds in the bush, or three birds in the bush, and you have to decide when they’re going to come out, and when you’re going to acquire them.
Now, if interest rates are five percent, and you’re going to get two birds from the bush in five years, we’ll say, versus one now, two birds in the bush are much better than a bird in the hand now. So you want to trade your bird in the hand and say ‘I’ll take two birds in the bush,’ because if you’re going to get them in five years, that’s roughly 14 percent compounded annually and interest rates are only five percent. But if interest rates were 20 percent, you would decline to take two birds in the bush five years from now. You would say ‘that’s not good enough,’ because at 20 percent, if I just keep this bird in my hand and compound it, I’ll have more birds than two birds in the bush in five years.
Now, what’s all that got to do with growth? Well, usually growth, people associate with a lot more birds in the bush, but you still have to decide when you’re going to get them. And you have to measure that against interest rates, and you have to measure it against other bushes, and other, you know, other equations.
And that’s all investing is. It’s a value decision based on, you know, what it is worth, how many birds are in that bush, when you’re going to get them, and what interest rates are.”
Buffett’s full explanation on Aesop and interest rates
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.
Famed investor Phil Fisher, author of Common Stocks and Uncommon Profits, believed that there was a lot more work for a successful investor to do besides just reading financial reports. He also focused on scuttlebutt (a word meaning rumor or gossip) to find out what people were saying about a company. It is a method that Warren Buffett endorses.
“When I started out, and for a long time I used to do a lot of what Phil Fisher described. I followed his scuttlebutt method,” Warren Buffett said at the 1998 Berkshire Hathaway Annual Meeting. “ I believe that as you’re acquiring knowledge about industries in general, companies specifically, that there really isn’t anything like first doing some reading about them, and then getting out and talking to competitors, and customers, and suppliers, and ex-employees, and current employees, and whatever it may be.”
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.