Warren Buffett and value investing
How did Warren Buffet do it? How did he break the odds year after year and beat every trader out there? What exactly is his game plan and is it something secretive or is it something I could use to make great returns on my money?
Well, first to understand Warren Buffett you must understand a few things. He did not come from a super wealthy background like many of his fellow wall street investors and bankers. The average wall street employee graduated from an ivy league college or other elite college like MIT, Notre Dame, Cornell, Harvard, etc... and comes from a family that is well off. But, he was a go getter. He hustled everything he could from gum to bottles of Coke (which he still drinks and even owns heavily in his portfolio today).
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Warren Buffett learned early on to reinvest any profits. He would plow them right back into other business ventures and companies through stocks. At Columbia University he studied under Benjamin Graham and took heavily from Graham's investing style. What Graham preached was to buy distressed stocks of companies that were going for more than 50% off. Warren later changed this around a little to his liking and basically he went after companies that were priced as bargains that he knew from looking at their financials (in many of his purchases this is all he looks at) and then he bought them for the long haul.
Now, let me repeat that again - the long haul. He did not buy stocks to resell them later that day or week. He didn't sell them even if they made a reasonable quick profit. He wanted these companies and stocks for many years and still prescribes to this today. You won't find Warren Buffett changing his portfolio for Berkshire Hathaway daily. He may look at it and cringe sometimes when the stock market drops like it did this past Thursday, but he has weathered far worse and he has been through many recessions, global slowdowns, oil embagos, wars (Vietnam, Korea, etc...), etc... and he is not scared by a 10% drop in Coke, for instance in one week. He knows what its worth, knows the CEO and board, believes in the product, and knows they will continue to grow - Coke is now expanding big time into China with its billion dollar purchase of China Huiyuan Juice Group to gain a huge market share and presence in China. I am sure Warren will profit nicely from this now and in the future.
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He stays away from most technology stocks as they can be more risky for long term growth. He likes to stick with what he knows and this is very important. If you know, for instance, that Ipods are a hot commodity and they just keep getting hotter than you also know that stock in a company like Apple is only going to go higher. Yes, there can be set backs, like the current global slowdown which is really reaking havoc on the foreign markets and ETF's (just look at Vimpelcom (VIP) a great stock and company that is just getting hammered lately due to Putin, the Russia - Georgia conflict, and a weak global economy). But if one invests with Warren's approach with a taste for the very long term, one will most likely find that they will be very well off and rewarded. Just look at anyone that invested with Warren Buffett back in the 60's - they are all multi millionaires and many are better off than if they had won the big powerball lottery.
The above article is not to be taken as investment advice. For proper advice please see your licensed broker or advisor.
Well, first to understand Warren Buffett you must understand a few things. He did not come from a super wealthy background like many of his fellow wall street investors and bankers. The average wall street employee graduated from an ivy league college or other elite college like MIT, Notre Dame, Cornell, Harvard, etc... and comes from a family that is well off. But, he was a go getter. He hustled everything he could from gum to bottles of Coke (which he still drinks and even owns heavily in his portfolio today).
Apply for the Discover® Open Road Card today! link goes direct to application
Warren Buffett learned early on to reinvest any profits. He would plow them right back into other business ventures and companies through stocks. At Columbia University he studied under Benjamin Graham and took heavily from Graham's investing style. What Graham preached was to buy distressed stocks of companies that were going for more than 50% off. Warren later changed this around a little to his liking and basically he went after companies that were priced as bargains that he knew from looking at their financials (in many of his purchases this is all he looks at) and then he bought them for the long haul.
Now, let me repeat that again - the long haul. He did not buy stocks to resell them later that day or week. He didn't sell them even if they made a reasonable quick profit. He wanted these companies and stocks for many years and still prescribes to this today. You won't find Warren Buffett changing his portfolio for Berkshire Hathaway daily. He may look at it and cringe sometimes when the stock market drops like it did this past Thursday, but he has weathered far worse and he has been through many recessions, global slowdowns, oil embagos, wars (Vietnam, Korea, etc...), etc... and he is not scared by a 10% drop in Coke, for instance in one week. He knows what its worth, knows the CEO and board, believes in the product, and knows they will continue to grow - Coke is now expanding big time into China with its billion dollar purchase of China Huiyuan Juice Group to gain a huge market share and presence in China. I am sure Warren will profit nicely from this now and in the future.
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He stays away from most technology stocks as they can be more risky for long term growth. He likes to stick with what he knows and this is very important. If you know, for instance, that Ipods are a hot commodity and they just keep getting hotter than you also know that stock in a company like Apple is only going to go higher. Yes, there can be set backs, like the current global slowdown which is really reaking havoc on the foreign markets and ETF's (just look at Vimpelcom (VIP) a great stock and company that is just getting hammered lately due to Putin, the Russia - Georgia conflict, and a weak global economy). But if one invests with Warren's approach with a taste for the very long term, one will most likely find that they will be very well off and rewarded. Just look at anyone that invested with Warren Buffett back in the 60's - they are all multi millionaires and many are better off than if they had won the big powerball lottery.
The above article is not to be taken as investment advice. For proper advice please see your licensed broker or advisor.
I think there is an awful lot of luck at play here too, though. Look at all the traders and investors out there - yet only a handful really ever make any money. Warren Buffett must have done something right, but I think luck played a huge role.
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Warren Buffett may have made billions with his buy low and hold plan, but even he loses money sometimes and apparently, according to the news, he lost big this week to the tune of 6 to 10 billion dollars. I couldn't imagine even having that kind of money.I would retire with 10 million. Shoot, I would probably retire with 1 million. Warren Buffett just lost 6 to 10 billion dollars!
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