Warren Edward Buffett is an American investor, business tycoon, and philanthropist, who is the chairman and CEO of Berkshire Hathaway. He is considered one of the most successful investors in the world and has a net worth of US$88.9 billion as of December 2019, making him the fourth-wealthiest person in the world.- Wikipedia.
Buffett runs Berkshire Hathaway, which owns more than 60 companies, including insurer Geico, battery maker Duracell and restaurant chain Dairy Queen.
So what can we learn from Warren Buffet as we stand stuck in a deep recession wading through a pandemic which has left us guessing at the outcome?
Warren Buffet has some truisms which have navigated his way to his fortunes. Let’s explore some and learn a few things to help us along.
Invest in what you know…and nothing more.
So when you make a call on Bitcoin or Gold or even the currency, how much do you know about what you are investing in? Far too often we rush into investments
not doing our homework. Warren Buffet prefers to leave investments he does not understand well alone.
When you buy a stock, plan to hold it forever
“If you aren’t thinking about owning a stock for ten years, don’t even think about owning it for ten minutes.”
A sound strategy but COVID19 changed all that and he was realistic enough to make an exception to this rule.
Buffett has remained relatively quiet during the corona virus market downturn: Rather than make any large acquisitions, he’s trimmed Berkshire’s holdings—mostly banks and airlines so far.
Buffet’s biggest recent move was to sell off 84% of his stake in Goldman Sachs, a long time holding which he famously invested $5 Billion into during the 2008 financial crisis.
Buffett decreased his stake in Goldman from over 12 million shares to just under 2 million which saw the stock plunge over 30% in the first quarter.
Warren Buffett sold his Airline Stocks during the pandemic because of debt and over capacity. Berkshire Hathaway disinvested in American, Delta Southwest and United Airlines. Another deviation from his rule in the face of the global pandemic. Makes you wonder about SAA and how we carry on pouring money into its debt and overcapacity?
Know the difference between price and value
“Price is what you pay. Value is what you get.” – Warren Buffett
His understanding of value ‘stands out’. Many investors know the price of a stock but not the value. Warren buffet made the point during the 2008 financial crisis
During the extraordinary financial panic that occurred late in 2008, I never gave a thought to selling my farm or New York real estate, even though a severe recession was clearly brewing.
Taking it a bit further, his appreciation of value over price is seen in his lifestyle:
Buffett is reportedly worth more than $80 billion. When he purchased his previous new car in 2006, he chose a cushy, but not outrageous, Cadillac DTS, priced at about $45,000.
Warren Buffet’s Portfolio
It has an enormous pile of cash that earns interest while waiting to be invested in a business or other productive asset.
In this uncertainty we can learn from the most successful investor ever. The biggest lesson from my point of view is ‘keep it simple’ – “do your homework but don’t be stubborn when you need to change’ and ‘know the value of your assets’.