Invest long term in Warren Buffett’s stock picks
Categorized: Warren Buffett investment strategy, Warren Buffett stock picks | 1 comment
In order to invest like Warren Buffett, you have to follow his strategies. Warren Buffett is a buy and hold investor. However, it is a common misconception that he is a value investor because he is a disciple of Benjamin Graham – the author of the Intelligent Investor and the father of value investing. In a recent study, it showed that Warren Buffett’s stock picks are in the category of growth stocks. The point is that if it is a good company, a higher price might be justified for a long term investment. The key here is long term for a Warren Buffett investment. However, this is not to say that valuations are not important.
Warren Buffett has been known to avoid investing in tech stocks. The reason is that it’s a highly competitive and unpredictable market. During the dot com days, people were indeed thinking long term – that the web is the future. Warren Buffett was derided as a has-bean and out of touch with the tech age. But guess who had the last laugh? Warren Buffett was right to be cautious during the tech bubble. Despite his warnings, no one paid attention to the high price per earnings ratio which reflected the the lack of earnings. And, in Warren Buffett investing, a proven company with a good management team are a must. Also, the business must be simple to understand with a competitive advantage.
There are no certainties in life but given a guess, would anyone care to predict if Google will still be the dominant search engine in twenty years time? Compare this with the certainty that the world would probably still be drinking Coca Cola in the future, one of Warren Buffett’s stock picks.
The brand of Coca Cola is indomitable. It is a 100 year old company known throughout the world and there is still growth to be had in the developing nations. Warren Buffett’s pick of Coca Cola shows that growth can still occur in proven companies.
The bottom line to long term Warren Buffett investing is how certain are you with the future of the company in question? Remember that by being a shareholder of a company, you are part owner. If we expand this idea, does it make sense to you to own a business for one year? Five years? No, most people would own a business for the long term which is 10 years or more. Also, keep in mind that by buying and holding, you are not incurring the trading commissions. By trading frequently, this will erode your capital.
In summary, in Warren Buffett investing style, look for a proven company with long term prospects. Remember too, that Warren Buffett is a growth investor so pay companies what they are worth if it is a simple business who has a hold on the marketplace already and looking to expand globally.
By following Warren Buffett investments, you can see that the Oracle of Omaha has reproduced his winning stock formula countless of times by using his basic rules and investing strategy.
Tagged with: Investment strategy, Stock picks
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[...] So if Buffett is not buying gold in the recession, what is Warren Buffett buying? Buffett is a follower of Benjamin Graham and likes to buy companies on the cheap – actually, who doesn’t when the point of playing the stock market is buying low and selling high. But judging by Berkshire Hathaway’s immense cash position, you can see that he doesn’t buy companies on a whim. There are few companies that pass his tests for having good intrinsic value. However, according to a recent interview with Buffett, likes Burlington Northern Santa Fe very much. This is his hedge against a weak dollar and inflation – by buying a railway company that he predicts will perform better than the trucking industry due to the high cost of fuel in the years ahead. Now that’s an interesting view on things but then again, that’s why he’s Warren Buffett and you can about his long term stock picks. [...]
on January 12, 2010 at 9:27 pm