With popular stocks across nearly all sectors trading down over the past several months, investors are faced with an abundance of opportunities to invest in quality businesses at bargain prices. There are few proponents of this idea of buying quality businesses at bargain valuations than famed investor Warren Buffet, who has built an empire around this long-term, value-oriented investing thesis.
And according to a recent report by CNBC, all of the world's 10 richest individuals have lost billions of dollars since the start of the new year, with the exception of Warren Buffett. In this segment of Backstage Pass, recorded on Jan. 28, Fool contributors Rachel Warren, Jon Quast, Jason Hall, and Toby Bordelon discuss Buffett's approach to investing and what investors can learn from the business titan.
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Rachel Warren: [laughs] Am I surprised at the Oracle of Omaha continues to surpass most other investors and leave them in the dust? No, not really. I don't think growth investing is over, but I do think we've historically seen this tug of war between periods where growth stocks are really popular and then people are headed toward more value-oriented stocks. I personally have always enjoyed combining a little bit of both into my overall investing approach.
Some of those more, well, historically growth-oriented plays, some of which are a little beaten down right now, and then some of those classic value stocks, like in healthcare, like Johnson & Johnson (JNJ -0.72%) or an AbbVie (ABBV -0.45%) are a couple that come to mind. You could sometimes argue that perhaps Apple (AAPL 0.49%) could be a value stock depending on how you look at it. Personally, I think the best approach is to always incorporate a little bit of each of those strategies and that's what I've done, into your investing. I think we are going to see a lot more value investing, especially in this inflationary period.
I think people are looking a lot closer at some of those stalwart, slower growth stocks because a lot of the companies you'd be looking at, say, eight, nine months ago for those rapid portfolio gains, they just aren't having that kind of share price appreciation right now. I don't think it's gone, I just think growth investing might be not what it was for at least a bit of time, but I personally, I invest in stocks from both camps.
Jon Quast: Yeah, just real quick. It's no surprise and what Buffett is so good at, he doesn't care what anybody else thinks, what anybody else does, he is going to do what he is convinced is going to work best and he continues to march to the beat of his own drum and once again, outperforming so many other people. I think that that's the takeaway, to be so grounded in your investing convictions and what you have demonstrated to work over 50 years, you're not changing because of market condition.
He continues to just do his thing. Just anecdotally, I was just thinking about my own portfolio and some of the decisions that I made in 2021 that didn't work out so well specifically with high-valuation stocks. There was a few that just really bugged me, the valuation, but they stayed higher for longer than what I thought was possible. Think about even AMC (AMC -1.04%), for example, that has been going on for a year now. It's still like a 10-bagger from where it was a year ago.
We call that a pump and dump, but the dump has taken longer than I ever thought possible. The same thing with high valuations, they stayed higher longer than I thought possible and you begin to say to yourself, well, maybe this is the new normal. Maybe the high valuation is just here to stay, so go ahead and buy this, and then it tanks 50%, turns out it wasn't here to say. I don't have the discipline of Buffett to the patience that he has. It's unbelievable.
Jason Hall: Well, I think Warren Buffett will be the first to remind us that we're talking about a very short period of time. Let's look at how we are using Berkshire (BRK.A -0.87%) (BRK.B -0.86%) stock as a proxy. That's the purple line has done over the past six or seven years and guess what? It's still trailing S&P over the long-term and certainly trailing using the Nasdaq-100 as a proxy for growth stocks, is not delivering.
But again, that matches up with what Buffett's always said. He said that Berkshire has gotten so large, in a bull market Berkshire is not likely to outperform, in a bear market it's likely to be the superior investment.
If you're 90 and you're not worth billions, and you want to have a high floor and a stable level of income, Berkshire, and Buffett should be your hero right now. It should be your North Star. If you're looking for growth, the evidence is still that growth stocks should be where to invest. All stocks are growth stocks to some extent. Value stocks is just what you paid for it.
Toby Bordelon: Yeah, you want growth. You always want growth, every stock you invest in you should think has growth. I think Warren Buffett has always been a master investor. We've always heard and whenever the market gets high, wherever we have a bull market, he's lost his touch, he doesn't understand the new economy.
But he hasn't lost his touch, Berkshire's performing the way I think it's intended to perform, as Jason mentioned, that it was set up to perform. It's a railroad company. It's a financial company. It's an energy company. This time is not different. It's never different. This time is never different.
Hall: It's a durable, resilient cash flow company.