Warren’s Wisdom!

Warren Buffett, CEO of Berkshire Hathaway, released his annual letter to shareholders yesterday.

Buffett’s annual letter is considered a must-read for all investors, whether they own stock in Berkshire Hathaway or not. This is because there is not an investor alive with more wisdom than the “Oracle of Omaha”. If you’re a Star Wars fan, think of Buffett as the Yoda of investing.

Buffett’s investment style has always been to buy value in businesses that he understands. He owns companies like Coca-Cola, Wells Fargo, Kraft Heinz, Geico, and See’s Candy. All of these are sound businesses that make money and will continue to make money in the foreseeable future.

One of the things all of Buffett’s investments have in common is that their business models have remained the same for years, and will continue to be the same for years to come.

Buffett is one of the founding fathers of the buy and hold strategy. He learned this lesson at the age of eleven.

Eleven-year-old Warren purchased shares in a company called Cities Service, which was trading at $38 a share. At the time, most of the headlines regarding the economy were negative – but he didn’t care.

The stock proceeded to go down from $38 to $20 over the next several months. Even as young as he was, he didn’t sell it. He just remained patient.

Over time, shares of Cities Service made their way to $40. At that point, young Warren took his money and ran.

Here’s the most important part of the story, though: a year later, that stock was at $100. It then proceeded to go up to $200. That taught young Warren Buffett the importance of buying and holding. If he’d held on to his shares, his investment would be worth far more than the profit he made when he sold!

In this year’s annual letter, Buffett affirms his belief that the future of American enterprise will continue to thrive – regardless of who occupies the White House, or whatever geopolitical or economic crisis we may experience over the next 25 years.

 

My book, The Stock Market is For Everyone, is a short guide for the beginning, inexperienced investor that is easy to understand and can be put into action immediately.

Click the image of the book at left to be taken to its Amazon page.  (Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)

 

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Is The Golden Age Of Investing Really Over?

Charlie Munger was interviewed by Becky Quick on CNBC this morning.  If you don’t know who Charlie Munger is, he is Warren Buffett’s right hand man and one of the most respected businessmen in this country.

Becky Quick asked Mr. Munger what he thought of the stock market, and his response was sobering.

He said that the golden age of investing is behind us, because it’s much more difficult now to pick individual stocks.  He said the valuations are just too high, and finding value would be extremely difficult.

I have a tremendous amount of respect for Charlie Munger as an investor.  His track record is stupendous.  I don’t know, though, if he’s right about the golden age of investing being behind us.

I will acknowledge that the 60s, 70s, 80s, and 90s were incredible times to be in the stock market.  Companies like Walmart (NYSE: WMT) have turned $1600 into $16,000,000 over a 30 year period.

However, we are entering a completely different world.  A world where market opportunities are in the trillions, not billions.  Never in the history of mankind have we had so many technological innovation platforms emerging at the same time:

Bill Gates said that a breakthrough in artificial superintelligence would be worth ten Microsofts.  ARK Investment’s Catherine Wood and her analysts believe a breakthrough could be worth 35 Amazons.

For all we know, the golden age of investing could very well be ahead of us.

 

My book, The Stock Market is For Everyone, is a short guide for the beginning, inexperienced investor that is easy to understand and can be put into action immediately.

Click the image of the book at left to be taken to its Amazon page.  (Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)