Tag: Value Investing

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.”

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© 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

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© 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 has learned a lot over the years from studying the mistakes that other people have made. In fact, he and Charlie Munger are students in the study of folly.

“In terms of reading of financial history and all that sort of thing, I’ve always been absolutely absorbed with reading about disasters,” Warren Buffett said at the 2012 Berkshire Hathaway Annual Meeting. “And there’s no question. I mean, when you look at the folly of humans — you know, I’ve focused on the folly in the financial area — there’s all kinds of folly elsewhere — but just the financial area will give you plenty of material if you like to be a follower of folly. And I do think that understanding, and that’s what gave us some advantage over these people that have IQs of 180, you know, and can do things with math that we couldn’t do. They just, they really just didn’t have an understanding of how human beings behave and what happens. 2008 was a good example of that, too. So, we’ve, we have been a student of other people’s folly, and it’s served us well.”

Hear Buffett’s full explanation

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© 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

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© 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 famous for saying “Be fearful when others are greedy and greedy when others are fearful.” However, this shouldn’t mislead investors that just being contrarian is the key to investing success.

“Being contrarian has no special virtue over being a trend follower,” Warren Buffett noted at the 2006 Berkshire Hathaway Annual Meeting. “You’re right because your facts and reasoning are right. So all you do is you try to make sure that the facts you have are correct.”

Hear Buffett’s full explanation

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© 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

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© 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.

What are Warren Buffett’s criteria for buying a stock? They are very straightforward. They are all about understanding a company, projecting its future earnings, and evaluating the quality of a company’s management. As Buffett notes, “It is simple, but not easy.”

“The criteria for selecting a stock is really the criteria for looking at a business. We are looking for a business we can understand,” Warren Buffett said at the 1998 Berkshire Hathaway Annual Meeting. “That means they sell a product that we think we understand, and we understand the nature of the competition, what could go wrong with it over time. And then when we find that business we try to figure out whether the economics of it means the earning power over the next five, or ten, or fifteen years is likely to be good and getting better or poor and getting worse. But we try to evaluate that future stream. And then we try to decide whether we’re getting in with some people that we feel comfortable being in with. And then we try to decide what’s an appropriate price for what we’ve seen up to that point.”

Buffett’s full explanation of his criteria for buying a stock

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.