Warren Buffett has said he bought his first stock at 11 years old, which means he's been investing for 81 years. If that's not the definition of long-term investing, I don't know what is.
With those 81 years comes an incredible amount of wisdom, leading the investing community to often turn to Buffett in times of peril, simply because he's been an investor throughout the market's worst. In fact, over the course of Buffett's investing career, he's seen 12 recessions and nine bear markets. So, it goes without saying, the current market environment is nothing new to the Oracle of Omaha.
With that much experience in market volatility, Warren Buffett's investing activity during past bear markets could offer some insight.
Image source: Getty Images.
Warren goes on the offensive
A study of Buffett's investing activity shows he's quite conservative when stocks are rising quickly, but strategically aggressive when prices fall -- and Berkshire Hathaway's (NYSE: BRK.A) acquisitions in recent bear markets confirm this.
|
Recent Market Declines of 20% or More |
Acquisitions |
Price Paid (millions) |
|---|---|---|
|
Dot.com Bubble (2000-2002) |
Acme Brick Company |
$600 |
|
Justin Brands |
$570 |
|
|
Benjamin Moore and Co. |
$1,000 |
|
|
John Manville |
$1,000 |
|
|
Fruit of the Loom |
$835 |
|
|
Northern Natural Gas |
$928 |
|
|
Great Financial Crisis (2007-2009) |
Cavalier Homes |
$48 |
|
Marmon Group |
$4,500 |
|
|
Current Bear Market (2022) |
Alleghany Corporation |
$11,600 |
Data source: Berkshire Hathaway filings.
If you're curious as to how these acquisitions have turned out for Berkshire Hathaway's stock price, consider the chart below.
Berkshire Hathaway's acquisitions during market declines show that while the market is in panic mode, Buffett is usually loading his elephant gun. And that's without considering the stock purchases made by the company during those bear markets. While there's certainly more to his success as an investor, his ability to make level-headed decisions when the market is doing the opposite is a huge reason he's regarded as the greatest investor of all time.
Buffett keeps his focus on the long term
Panic selling is a side effect of short-term focus from investors. With the exceptions of investors about to retire or those in dire need of cash, there's little reason to sell high-quality stocks that have taken a beating simply due to macroeconomic factors outside the businesses' control. And yet, every five years or so, that's exactly what countless investors do as the market turns bearish.
It's safe to say, however, that Warren Buffett is not one of them. This quote from the Berkshire Hathaway CEO sums up the mindset all long-term investors should strive to emulate:
Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a fly epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.
Next time you hear someone tell you to get out of the market because something scary is going on in the world, go back and reread that quote.
Ignore the noise and stay the course
Warren Buffett is regarded as the greatest investor of our generation for good reason. He's been investing for 81 years and has continually taken advantage of panic sell-offs by purchasing assets at extremely discounted prices. If you do those two things, there's little else you need to worry about.
