What It Really Means to Invest Like Warren Buffett

Investing like Warren Buffett is much less active than you may think.

Aug 10, 2014 at 1:13PM


In selecting common stocks, we devote our attention to attractive purchases, not to the possibility of attractive sales.

- Warren Buffett (1985)

There is something supremely ironic about the market's embrace of Warren Buffett, the chairman and CEO of Berkshire Hathaway.

On the one hand, he's touted by traders and active investors as evidence that the average person can (or, at least, should try to) beat the market. On the other hand, it's probably safe to assume that he abhors anything which even closely resembles their approach.

Unlike the typical portrayal of an investor in an advertisement for an online brokerage (you know the one, with a guy sitting in an overly luxurious home office -- in the middle of the day, no less -- effortlessly trading in and out of stocks), Buffett does not actively sell stocks. He buys and then holds onto them for as long as possible.

"In selecting common stocks, we devote our attention to attractive purchases, not to the possibility of attractive sales," he wrote in his 1985 letter to shareholders. That this is subtle shouldn't be interpreted to mean it's unimportant.


The virtues of buying a select few stocks and then holding them for years if not decades is evident in Berkshire's portfolio of public securities.

Its three biggest holdings were initiated more than two decades ago -- Coca-Cola in 1988, Wells Fargo in 1989, and American Express in 1991 (the initial stake was in American Express' preferred stock). Together, these three add an astounding $37.8 billion to Berkshire's balance sheet above and beyond its cost basis.

This is excluding the fact, moreover, that all of these companies distribute a considerable portion of their earnings each year in dividends, which Buffett then recycles into additional investment ideas. For its part, Coca-Cola pays out nearly two-thirds of its net income each year to shareholders like Berkshire.


The point here is that Buffett should be used as an example for investors. But that example is not to actively trade in and out of stocks. It is rather to identify great companies, accumulate concentrated positions in them, and then allow the fruits of your work to mature in the years if not decades ahead.

"Lethargy bordering on sloth remains the cornerstone of our investment style," Buffett wrote in 1990. I encourage you to always remember that this is what the Oracle of Omaha stands for, and not what's often insinuated in the mainstream financial media.

Warren Buffett: This new technology is a "real threat"
At the recent Berkshire Hathaway annual meeting, Warren Buffett admitted this emerging technology is threatening his biggest cash-cow. While Buffett shakes in his billionaire-boots, only a few investors are embracing this new market which experts say will be worth over $2 trillion. Find out how you can cash in on this technology before the crowd catches on, by jumping onto one company that could get you the biggest piece of the action. Click here to access a FREE investor alert on the company we're calling the "brains behind" the technology.

John Maxfield has no position in any stocks mentioned. The Motley Fool recommends Berkshire Hathaway. The Motley Fool owns shares of Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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