Buffett Oversexed for the First Time Since 1974

Warren Buffett was ranked by Forbes as the richest man in the world during the first half of 2008, with an estimated net worth of $62 billion. He has made his fortune entirely through investing.

He started off managing money. These days, he controls Berkshire Hathaway (NYSE: BRK-B  ) , a $190 billion conglomerate of wholly owned companies, which also has significant equity stakes in huge companies like Coca-Cola (NYSE: KO  ) , ConocoPhillips (NYSE: COP  ) , and Johnson & Johnson (NYSE: JNJ  ) .

He is widely acknowledged to be the best stock market investor ever.

In an article last week in The New York Times, Buffett revealed that with his own money, not Berkshire’s, he is buying stocks. Having previously been 100% invested in U.S. Government bonds, he is moving out of them and into stocks.

Searching for my first billion
Over the years, I and many others have tried to copy Buffett’s investment style, and his investment strategies. Most, including myself, have not even come close to matching his returns, let alone his wealth. I’m still searching for my first billion, and right now, I can tell you it’s about as far away as Mars.

In his 2007 letter to Berkshire Hathaway’s shareholders, Buffett clearly and succinctly laid out his individual stock-picking strategy. He looks for companies that have ...

  • a business he understands;
  • favorable long-term economics;
  • able and trustworthy management; and
  • a sensible price tag.

It’s all very sensible and remarkably simple. The devil is in the details, of course, especially when it comes to assessing a company’s long-term economics.

For example, Buffett used to wax lyrical about the fantastic economics of the newspaper industry, and their competitive moats -- it’s one of the reasons why he first bought shares in Washington Post (NYSE: WPO  ) . Not anymore, as the Internet has changed the economics of the newspaper industry for good. If even Buffett can get it wrong, it’s no wonder us mere mortals can’t replicate his success.

Classic Buffett quotes
Buffett is probably the most quoted investor on the planet. Over the years, he’s provided us with classics like ...

“Risk comes from not knowing what you're doing.”

“Rule No. 1: Never lose money. Rule No. 2: Never forget rule No.1.”

“Price is what you pay. Value is what you get.”

Like his stock-picking strategy, the quotes are simple. They make perfect sense. Yet they’ve mostly been theoretical, because Buffett has rarely given direct and unequivocal advice, like “Buy American Express (NYSE: AXP  ) at $25” or “Sell PetroChina (NYSE: PTR  ) at $150.” At best, you hear about his buys and sells way after the fact, and often without explanation.

Oversexed
But sometimes, just sometimes, he gives direct and timely advice. According to Wikiquote, the first time Buffett made a public prediction about the stock market was at the bottom of the bear market in October 1974. Forbes asked "How do you feel?” to which Buffett replied, "Like an oversexed guy in a whorehouse. Now is the time to invest and get rich."

Since then, Buffett has made few predictions, and as far as I know, no direct advice on the time to buy or sell stocks.

Until now:

“Equities will almost certainly outperform cash over the next decade, probably by a substantial degree.”

And Buffett’s reasoning? According to the New York Times article, it’s as simple as “Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors.”

Follow Buffett or guess?
When Buffett speaks, given that he’s made his wealth from investing, it usually pays to listen. Thousands of ordinary investors like you and I admire the man, trying to learn the secrets of his success and put them into practice so we too can be billionaires. Most of us are not, but at least we can try!

The global credit crisis and forthcoming recession have clearly spooked a lot of people. These are unprecedented times. As an investor, you have two options ...

  1. Try to guess how long the recession might be, guess whether it will be a V-, U-, or L-shaped recession, guess how it might impact on earnings, and make investment decisions made on those best guesses; or
  2. Follow Buffett’s advice, and buy now.

I know which option I’m taking.

Fool contributor Bruce Jackson has a beneficial interest in Berkshire Hathaway and American Express. The Motley Fool also owns shares of Berkshire Hathaway and American Express. Berkshire is a recommendation of both Inside Value and Stock Advisor. Coca-Cola and American Express are also Inside Value recommendations. Johnson & Johnson is an Income Investor choice. Phew. Try any of The Motley Fool’s newsletter services today free for 30 days. The Motley Fool's disclosure policy is a fan of Marlon Brando.


Read/Post Comments (12) | Recommend This Article (35)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 21, 2008, at 3:14 PM, EPS100Momentum wrote:

    Its funny that your article comes out on same day that I said I am buying

    tons of BRK-b

    October 21, 2008 – Comments (1) |RELATED TICKERS: BRK-B

    OK since we can't get the same terms a Warren Buffet can get

    on preferred shares of GS or GE then I have decided to buy tons of

    BRK.b which is trading at only $4130 a far cry from earlier this year of $5000+.

    http://finance.yahoo.com/q?s=BRK-B

  • Report this Comment On October 21, 2008, at 11:35 PM, bisnettrj2 wrote:

    Just me, but "Warren Buffett" and "oversexed" used in the same sentence? Ew. Ew ew ew.

  • Report this Comment On October 21, 2008, at 11:42 PM, dividendgrowth wrote:

    I find it really funny that so MANY small retail investors bashed Buffett after he made that announcement.

  • Report this Comment On October 22, 2008, at 10:52 AM, lollard wrote:

    Correct me if I'm wrong, but I thought Berkshire had sold its stake in Conoco-Phillips?

  • Report this Comment On October 22, 2008, at 3:54 PM, MoPicks wrote:

    The Forbes article quote was actually that he felt like an oversexed guy in a "harem", not a whorehouse. I don't think Warren would say whorehouse.

  • Report this Comment On October 22, 2008, at 6:14 PM, djvalder wrote:

    It's not really the same, we fools are investing in the $1,000s he is investing in the $100,000,000s - When he invests the company he invests in sits up and takes notice. Nobody on the board cares if I buy or sell 100 shares. But we have much more at stake - our well being in retirement, our children's education etc. we can't afford to gamble big as WB can. He can afford to loose 99% of his wealth and it would have no significant effect on his life. I can't.

  • Report this Comment On October 22, 2008, at 11:29 PM, thatchmo wrote:

    My first post to a fool site....I'm still planning on buying regularly and maybe even upping my purchases. But, as stated in the article, these are unprecedented times. In 1974 was there: 2 plus wars going on, decade plus of consumer negative saving, exposure of huge structural and systemic problems with "the system", etc.? (I was there, but wasn't paying much attention...) I'm still waiting for someone to really convince me that this thing won't crash and burn-further. I guess $$ won't be of much value then either, so might as well invest as much as I can stomach now. Aloha.

  • Report this Comment On October 23, 2008, at 4:21 AM, dividendgrowth wrote:

    We had a political crisis in 1974, and we are having a financial crisis in 2008. Confidence loss is huge, and people are panicking. But if you think the Dollar is going down the toilet, then you should really buy stocks (and commodities).

  • Report this Comment On October 23, 2008, at 4:22 AM, dividendgrowth wrote:

    The really scary thing now is that Dollar and US Treasury are going up and everything else is crashing, which is a typical deflation scenario.

  • Report this Comment On October 25, 2008, at 11:39 AM, miscfool wrote:

    Well, Buffett has long been worth listening to ... UNTIL I got to thinking.

    (I hate when I do that! :-) )

    I owned BRK.B for a while at the turn of the millenia, but I sold it off. Why? Because of some subtelties that I found problematic.

    1) WB always says that if companies do not know what to do with their money (no takeover targets, no new businesses to enter into that are profitable, etc.), they should give it back to their investors. Yet, even when he complained that there were no good stock buys when everything was so over priced, BRK.B did not give $$$ back to its investors (or at least did not back then - has it changed?). Even a small dividend would have given WB a chance to practice what he preached. It would have also eliminated the problem of having BRK.B onlyas a pure capital play .

    2) WB talks about excellent management, but did not always go out of his way to enforce it in the companies in which he has a significant or controlling ownership share. If WB cannot crack the whip, what chance do we pay and pray investors have of asking for better management.

    3) You make your money when you buy (not sell - think about it). If I could buy stocks with a major discount and other sweetners, I would! But my mailed invitation to get 20+% off the share price and other considerations (such as preffered shares, etc.) seems to have been delayed in arriving, so I will drag my sorry over-charged discount brokerage retail-investor tail back to the drawing board and find some other way of making $.

    Note: Yes, SOME stocks are likely worth buying, but since I cannot predict how the economy is turning (and I have real expenses such as a mortagage and young family to feed), I am very, very gun-shy, regardless of WB's signal to buy.

    Good luck to all those who buy on WB's signal. You have my permission to smirk at me in 20 years if it all works out for you. :-)

  • Report this Comment On October 26, 2008, at 4:41 PM, snickerdoodle9 wrote:

    Gotta' love WB ;-) ! Brk.b and a are one of the safest investments to be in . How many ceo's can make the claim of taking a failing textile mill 40+ years ago and turn it into the continued successful business , " Berkshire Hathaway " that it is today ? Not many . Granted Berkshire has had a few potential wrinkles at the hands of a few scandelous individuals within a couple of the business , but once investigated WB " cleaned house " by removing them . It's because of ceo's like Warren and Charlie that Berkshire Hathaway remains a business built on the honesty and integrity that is a protection to all who are shareholders . I trust and will continue to own and buy shares of Berkshire Hathaway .

  • Report this Comment On October 28, 2008, at 4:24 AM, ImADancinFool wrote:

    I thought this was a "Family Site"; maybe "Family" doesn't have to mean stuffy after all!

    ;)

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