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Everyone in the investment world has heard of Warren Buffet– one of the world’s wealthiest people, consistently ranking high on Forbes’ list of billionaires. Known as the “Oracle of Omaha,” Warren Buffett is one of the most successful investors of all time. Investors revere his investing strategies across the globe. He follows the Benjamin Graham school of value investing. Buffett runs Berkshire Hathaway, which owns more than 60 companies. He is the world’s fourth-wealthiest person with a net worth of over US$85.6 billion as of December 2020
So, how has he managed to amass such a fortune from his investments?
Buffett follows the value investing philosophy from the Benjamin Graham School. Value investing looks for securities with prices that are unjustifiably low based on their intrinsic worth. He has always been a stern believer of the philosophy taught by Benjamin Graham: ‘Price is what you pay, Value is what you get’.
He has placed a great deal of importance on investing in companies with ‘moat.’ These are companies with an advantage, legal or operational, which prevent competitors from entering and affecting business margins. He has developed an expertise for looking at businesses as a whole and chooses companies solely based on their overall potential.
- Stick with Long Term Value Investing Strategies
Don’t let fear and greed change your investing criteria and values. Avoid being overwhelmed by outside forces that affect your emotions. Never sell into a panic.
- Invest in What You Understand
Buffet only invests in companies he understands and believes that have stable or predictable products for the next 10 – 15 years, which is why he has typically avoided technology companies.
- Invest Like You Are Buying the Entire Company
Treat investing in stock as though you are buying the entire company. Always take a hard look at enterprise value because this is the total price of a company. In other words, it is the price you would be paying for the company if you could buy the whole company at current prices.
- Companies with Competitive Advantages
Companies with pricing power, strategic assets, powerful brands, or other competitive advantages can outperform in good and challenging times. A long-term investing strategy requires investing in companies that can weather both good and bad economic times.
- Find Quality Companies
Buffet believes in quality investing; he would rather pay a fair price for a great company than a low price for a mediocre company.
- Keep Cash On Hand
Investment opportunities become available through broad market corrections or individual stocks that become bargains. These are not predictable events, so cash on hand is an essential concept in value investing.
- Require a Margin of Safety
Purchasing stocks with a margin of safety below their intrinsic value reduces risk and allows for unforeseen adverse events.
- Compounding and Patience
Buffet believes in long-term value investing because he understands the power of exponential growth. Companies with sustainable profits can pay and grow their dividends. There are few more powerful long-term.
Warren Buffet Portfolio
- Bank of America (BAC)
- Apple (AAPL)
- Coca-Cola (KO)
- Kraft Heinz (KHC)
- American Express (AXP)
- Verizon (VZ)
- U.S. Bancorp (USB)
- General Motors (GM)
- Bank of New York Mellon (BK)
- Wells Fargo (WFC)
Top 10 shares held by buffet as of Dec. 31, 2020, based on Berkshire Hathaway’s most recent 13-F filing from Feb. 16.
Bank of America (NYSE: BAC) and Apple (NASDAQ: AAPL) dominate Buffet’s Stock Portfolio. Coca-Cola (NYSE: KO), Kraft Heinz (NASDAQ: KHC), American Express (NYSE: AXP), and Verizon (NYSE: VZ) form another 27% of his portfolio.
Some other stocks part of his portfolio are General Motors (NYSE: GM), Bank of New York Mellon (NYSE: BK), and Wells Fargo (NYSE: WFC), which make another 10% of his portfolio.
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The Bottom Line
Buffet has invested in stocks that have dominance in the industry and have proved to grow successfully. He has a portfolio of some value stocks and has built it with blue-chip companies having strong balance sheets, holding investments over a long time.
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