Warren Buffett has spoken out loudly to the world what he is doing in this fearsome stock market. The Oracle of Omaha has said very proudly that he is “been buying American stocks” with his personal funds.
For example, this giant investor in just two-week span, Buffett picked up Constellation Energy for a deal price of $4.7 billion. He bought $5 billion in preferred stocks from Goldman Sachs, receiving a heavy 10% yield. And he purchase $3 billion in preferred stocks of GE, also providing him another healthy yield of 10%.
By no ways this does mean Buffett is saying go out and buy Goldman or GE stocks. In fact, you will discover that there are plenty of reasons why you should not try to follow his lead. Remember and this is not the least of which is the fact that his company Berkshire gets agreements that we individual investors cannot.
But that is not the point. In order for us to get some wisdom from Buffett, the opportunity here is to pick up some valuable investing knowledge from the greatest investor on earth. Here is what I think you can learn from Buffets moves.
It has been so many times that Buffett has frequently say this: “Be fearful when others are greedy and greedy when others are fearful.” Today there are sufficient facts that people are scared! You are a witness everyday of how fund investors have been redeeming record amounts of money from their stock portfolios. By contrast, Buffett is putting his money to work.
By no means we are suggesting or does this mean the stock market will turn around tomorrow. But Buffett’s point is that this is not the time to run away from US stocks. In fact, now is your time to be looking for shares of high-quality growth firms that have been taken down to reasonable levels.
Second, you should not fall in love with your stocks. This is business and no emotions can influence your decisions. For example, Buffett is well known for having said that his favorite holding period was forever. But learn from his moves, he will sell a stock he loves if circumstances deserve it. Late last year, as crude oil passed the $100 per barrel he sold his stocks at Petro China. It all follows after multiplying more than five fold since he bought it a few years earlier, Petro China stocks had reached a fair value, so he sold.
All we have to do also is to always remember that there are big difference between Warren Buffett and us. If investing were as simple as mimicking Warren Buffett, then all we have to do to retire rich would be to download a free copy of the Berkshire Hathaway annual shareholder letter and shadow the Oracle’s moves. We cannot forget that Buffett can get deals that we cannot. Buffett reputation and Berkshire’s financial health are enormous advantages that regular investors simply don’t share. Many informal observers take for granted that Buffett simply buys great companies and hangs on them. Simple, right? But the real key to Buffett’s success is far more complicated. Buffett has created enormous value for Berkshire by buying all kinds of securities, from common stocks and preferred shares to currencies, distressed debts and options. These are all areas that only the most sophisticated investors should dabble in.
Category: Business News