“Warren Buffet does not buy stocks. He is, actually, buying a piece of the business of a company.”
These statements made by those who have personally interviewed him may be the best that could capture the core of Warren Buffet’s investment style.
With such a mindset, Warren Buffet did not only go one step higher in the practice of value investing but actually gave its philosophy a more sublime interpretation unseen—or probably ignored—by previous theoreticians, like his grand mentor, Benjamin Graham.
We’re on our last two investment celebrities on our study to better understand the principles and elements of value investing, and I’ll not make you wait any longer. We’ll take up Warren Buffet now and leave William J. O’Neil for last.
We will no longer go through the usual trivia on his supposedly interesting personal life, as well as his marvelous younger days, and we’ll go straight to his methods of investing that made him both the most influential investment thinker and the wealthiest investor of contemporary time.
Buying at bargain prices
An ardent student and reverend disciple of Benjamin Graham, Warren Buffet adheres faithfully to the primary principle of value investing. This means, he buys stocks at prices lower than what they are actually worth, thus, “buy stocks at bargain prices only.”
Unless he has recently changed his regimen, Warren Buffet does not have a quote machine on his desk. This is because, unlike most of us, he does not check stock prices regularly. According to him, “stock prices are unreliable indicators of a company’s worth,” another principle of value investing.
To him, daily stock quotes have no urgent value. He is often heard saying, “there are days when they’re up, others they’re down. Sometimes Wall Street thinks the market looks good, other times it thinks it looks bad. It’s willy nilly, unreasonable and unnecessary to know.”