Trading Tips

Warren Buffet Investment Strategy Theory From a Penny

November 05, 2019
Trading Tips
Warren Buffet Investment Strategy Theory From a Penny
Chapters
Trading Tips
Warren Buffet Investment Strategy Theory From a Penny
Nov 05, 2019
Trading Tips
Investing, at its core, is about finding value and waiting for the rest of the market to recognize that value. At least, that’s the short, simplified version of investing as understood by Warren Buffett. With his track record, it’s clear that he’s on to something. But value can change over time, and Buffett’s track record and shifting investment portfolio reflects that trend as well.
Show Notes

What Warren Buffett’s Investment Strategy Tells Us About Today’s Values

Only a few investors have come close to Warren Buffett’s track record. Over the decades, he’s beaten the market handily. That success all comes down to one factor: Value.

Whenever you buy shares of a company, if you don’t have an idea of what the company is worth, and will be worth in the future, it’s impossible to know if you’re buying at a great price or not.

In Buffett’s early investment years, the 1950’s, this could be taken to the extreme. Back then, stocks were still seen as a terrible place to invest following the Great Depression. As a result, values in general were a lot lower—and many companies could even trade for prolonged periods of time for less than the value of cash on the books! 

Under that kind of market sentiment, value investing is obvious. You could take control of a company, shut it down, and end up with more per share than when you started.

As the markets started regaining popularity, Buffett’s focus on value changed yet again, this time towards insurance companies, which have built-in capital advantages, as well as by focusing on companies with strong brands. While brands are a bit more intangible on a company’s balance sheet, they can usually charge more for their products than a generic peer.

Today, Buffett has been making a big mark in Apple—a company with a strong brand, but also one that has a lot more intangible assets as well. And it’s clear that such a company in the 21st century can still be a value play, thanks to the fact that it has also built itself a consumer culture around it. 

That kind of trend may become more important as companies become more intangible and hard assets like factories are no longer as important to building a long-term profit powerhouse. 

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