The S&P 500 is down 22% year to date, as of this writing -- one of the worst one-year performances in many investors' lifetimes. Returns in 2008 were worse, with stocks dropping 38% that year. But returns in 2022 are on par with 2002, which was the second-worst year for stocks in the last 47 years.

Investors love a good quote from investing great Warren Buffett. Many default to his pithy line, "Be fearful when others are greedy and to be greedy only when others are fearful." But what if I told that in 2002, when stocks were down 23% and down for a third consecutive year, Buffett didn't take his own greedy advice?

It's true. Back then, Buffett said he had an "aversion" to buying stocks and he consequently bought very little. This may shock some and discourage others. But either way, I believe Buffett's words from 20 years ago offer timely perspective for today's bear market investor.

Greedy for stocks or averse to them?

There's a common thread to Buffett's words on fear and greed in 1986 and his aversion to equities in 2002. In both cases, Buffett was teaching a valuable lesson on how to value a stock -- a lesson that's, unfortunately, often missed.

In his letter to Berkshire Hathaway shareholders in 1986, Buffett called fear and greed two diseases that unpredictably break out and spread. The fear disease leads to sell-offs that result in stocks being undervalued. And the greed disease leads to run-ups that result in stocks being overvalued.

However, Buffett's ultimate goal was not to greedily buy stocks whenever they were down -- that's reactive behavior based on price movements in the market. Rather he continued to objectively value stocks based on their business prospects, immune to the two "diseases" plaguing Wall Street. As he would go on to write, "Stocks can't outperform businesses indefinitely."

Fast-forwarding to 2002, the S&P 500 finished the year down 23% after having dropped 10% and 13% in 2000 and 2001, respectively. This three-year bear market resulted in a whopping 49% drop from the market's high. However, in his letter to Berkshire Hathaway shareholders in 2002 (which was written in February 2003), Buffett said, "We continue to do little in equities." That almost sounds fearful -- not greedy -- doesn't it?

Again, Buffett's primary concern wasn't how far stocks were down from their highs but rather whether those businesses were undervalued or overvalued. He would go on to write in 2002: "The aversion to equities that Charlie [Munger] and I exhibit today is far from congenital. We love owning common stocks -- if they can be purchased at attractive prices."

The risk of misinterpreting Buffett

Many have interpreted Buffett's words on fear and greed to mean you should simply buy stocks whenever they're down. As my buddy (who has never bought a stock in his life) told me earlier this week, "Now's the time to buy." For this reason, many investors -- diligently attempting to emulate Buffett's success -- continue to buy stocks in this bear market. Valuations are an afterthought.

Don't get me wrong: I'm not advocating for hoarding cash necessarily. I've been a bear market buyer myself. Two stocks I've aggressively purchased in 2022 are shoemaker Crocs (CROX -1.99%) and Zoom Video Communications (ZM 0.81%).

For Crocs, its revenue is growing and growth could accelerate due to its recent acquisition of Heydude. Moreover, the company is profitable and trades at a steep discount to the market average. And finally, management has adequately managed the challenges of inflation so far, giving me hope that its profit margins will largely hold up in this environment.

For Zoom, investors fear that its best days were back during the worst of the COVID-19 pandemic and that its business will slowly decline from here. But its remaining performance obligations (RPO) tell a different story. Zoom's RPO is at an all-time high of $3.2 billion, as enterprises continue to find the company's services valuable and expand the number of Zoom products they're using, which is why I'm still willing to buy this stock. 

But to reiterate, I'm not greedily buying shares of Crocs and Zoom simply because they're 56% and 86% below their respective all-time highs. That would be misapplying Buffett's sage advice. Rather, I believe I'm getting an "attractive price" for these stocks today, given my intended holding period of greater than five years.

The takeaway for investors is this: Whether stocks are up or down, always be looking to pay a fair price based on the business of the stock you're buying. Fixating on price movements can distract you from this important investing principle.