Barron’s co-editor Andrew Bary joins ‘Barron’s Roundtable’ with insight into the letter published on 27 February
Warren Buffett is one of the most successful investors in history. His incredible market-beating tenure as CEO of Berkshire Hathaway and the investment choices he made during that time earned him the name The Oracle of Omaha, and it’s not hard to see why Buffett’s investment advice and stocks are moving so far. consequence.
With a combination of uncertainty and opportunities currently on the horizon of the stock market, there are good reasons to look to one of the largest investors in the world for possible insight.
Read on for guidance on how to invest like Buffett in 2021.
WARREN BUFFET’S ANNUAL BERKSHIRE HATHAWAY LETTER: WHAT TO EXPECT
Make your choice with the long term in mind
Warren Buffett famously said that his favorite period for owning a share is ‘forever’. That does not mean he never sells shares, but his long-term investment has been a big part of his success over the years.
Under Buffett’s leadership since 1965, Berkshire achieved an average annual growth of 20.3%, which absolutely crushed the returns for the broader market over the same period. The conglomerate ended last year outperforming the S&P 500 index by about 2,700,000% since Buffett took over the company’s leadership, and its consistent, quality-oriented approach to investing has played a major role in that.
Investors need to focus on high quality businesses with competitive advantages and continuous opportunities that will allow their portfolio to thrive in the long run. This bit of wisdom is summed up by one of Buffett’s most quoted ways: “It’s much better to buy a great business at a fair price than a fair company at a great price.”
While the support of cheap stocks that are struggling underlying businesses or chasing volatile price fluctuations can sometimes bring huge profits, it is difficult to repeat consistently. The timing of the market is incredibly difficult. If you invest in strong companies with a buy-to-hold approach, you will be on the right track to excellent performance in the long run.
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What moves did Buffett and Berkshire make?
If you want to expand the goal of investments like Buffett, other than simply including his approach to analyzing, buying and owning shares, then you can show after the recent move by Berkshire Hathaway how you can do that. Berkshire must file a disclosure of its holdings in a document known as a 13F each quarter. Investors can refer to these documents to see what shares Buffett’s company bought and sold during the previous quarter.
There are a few different ways investors can repeat their investment strategies. One is to follow Berkshire’s biggest recent acquisitions.
Of the recent acquisitions, Verizon, Chevron, Marsh & McLennan and EW Scripps were brand new additions to the Berkshire portfolio, while expanding positions in the other companies on the list.
Investors can also repeat Buffett’s approach by building positions in Berkshire’s largest total positions, including Apple, Bank of America, Coca-Cola, American Express and Kraft Heinz. Looking at the overlap between the company’s biggest recent acquisitions and the biggest overall interest, it appears that Berkshire’s biggest conviction in the last quarter is Verizon. It made a major purchase of the stake in the telecommunications giant in the fourth quarter, which quickly made it the company’s sixth largest shareholder.
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Another way to invest in 2021 like Buffett
The other obvious way to invest like Buffett is to buy Berkshire Hathaway shares. The company invested more in the purchase of own shares than any other share or asset during the 12-month reporting period. This is a strong indication that Buffett believes his company’s shares are undervalued.
Berkshire Hathaway shares offer investors a simplified way to build a diversified position in a wide range of investments. In addition to the exchange-traded shares and fixed assets, the company also has full ownership of, among others, GEICO, See’s Candies and Duracell.
Although Berkshire’s somewhat conservative approach has meant that the performance of the broader market has deteriorated in recent years, as high – growth technology stocks have achieved major victories, the investment firm has one of the best management teams in the financial industry.
The market can be significantly volatile during the rest of the year, and it’s a good idea to keep an eye on the evolving strategies of one of history’s most successful, value-focused moneymen. Investors will be able to take a closer look at Buffett’s thinking when Berkshire publishes its annual shareholder letter at the end of this month.
This article represents the opinion of the author, who may not be in agreement with the ‘official’ recommendation position of a Motley Fool premium advisory service. We are furry! Questioning an investment thesis – even one of our own – helps us all to think critically about investments and to make decisions that help us become smarter, happier and richer.
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Keith Noonan has no position in any of the said shares. The Motley Fool owns and recommends shares of Apple, Berkshire Hathaway (B shares) and Bristol Myers Squibb. The Motley Fool recommends RH, T-Mobile US and Verizon Communications and recommends the following options: short January 2023 $ 200 place Berkshire Hathaway (B shares), short March 2021 $ 225 calls on Berkshire Hathaway (B shares) and long January 2023 Berkshire Hathaway (B shares) invested $ 200. The Motley Fool has a disclosure policy.