Long term stock picks from Warren Buffett
Filed by: wbsp, under blue chip companies, value companies | Leave a Comment
If you are thinking about investing for the long term, there’s no better person to learn from than Warren Buffett, the world’s greatest investor. As he admits himself, his hold period is forever. In a fast-paced financial world where money and stocks are changing hands constantly, it is nice to know that you don’t have to go through all that in order to make money. You can just let your winning stock picks ride. Obviously, the hardest part is finding these winners in the first place.
In order to understand how Buffett finds his long term stock picks, you have to understand that he is a student of Benjamin Graham – the father of value investing. The name of the game in the stock market is to buy low and sell high. Obviously you would be on the lookout for cheap companies who are (for whatever reason) undervalued because but whose books are sound when you do some fundamental analysis. The current global recession is the perfect example. Some external source of macroeconomics is affecting a perfectly good company and reducing its stock price. Even though it is a scary time to invest, if you have done your due diligence, you can pick up some great blue chip company stocks for cheap.
Now, you can try to time the market for the exact lowest price but frankly, small fluctuations aren’t worth the hassle if you look at the bigger picture. It will be easier if you pay what you calculate to be fair value as sometimes good companies are worth it. If you look at a sell-off in the market, it’s always the small caps and penny stocks that slide through loose hands first but the more stable blue chip companies usually hold their ground. This is not to say blue chip stocks will never drop down in value but they usually have better fundamentals to prop them back up when things go back to normal.
Some investors might argue that blue chip stocks are not good stock picks because they lack growth potential but if you look at what Warren Buffett is buying, you will notice that he only buys companies with a big competitive advantage. This is what he calls his business moat. He doesn’t want his competitors to erode the brand of his investments which has the chance to go multinational. How is that for growth?
So if you want to invest in the future, do yourself a favor and see whichs blue chip stocks are undervalued. In the end, blue chips are good long term stock picks because they hold their value and can be a growth stock too.
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