The wild swings of the stock exchanges are a source of stress for those approaching the markets. Not so for Warren Buffett, the 91-year-old American financier, known for his ability to turn his investments into gold. He proved it in these first weeks of 2022: despite the strong volatility of the markets, Buffett managed to increase his wealth, thus going against the tide of the richest in the world.
Since the beginning of the year, Berkshire Hathaway’s number one is the only person in the top 10 to have increased his net wealth: + $ 4.5 billion with an estimated net worth of $ 113 billion, according to the Bloomberg Billionaires Index. Buffett’s strategy? Here are the three main pillars.
Buffett: Focus on the fundamentals
“When you buy a stock you have to take that into account prices can drop by 50% or even more. But at the same time you have to feel comfortable, ”he said the CEO of Berkshire Hathaway during the 2020 shareholders’ meeting.
The secret to staying calm? Focus on the fundamentals of the company, not on the performance of the shares. On the other hand, Buffett’s strategy has always been the same: when he invests in a stock he does it in a long-term perspective.
“If there’s a quality you need to invest like Warren Buffett is patience,” said Robert Johnson, Berkshire Hathaway shareholder, professor of finance at Heider College of Business at Creighton University in Omaha, Nebraska. . “When we buy a stock, we should be happy even if we are told that the market will close for a couple of years. Let’s look at the business, ”he said.
Never invest in a business you cannot understand
If investing in a long-term perspective is the basis of Buffett’s investments, there is another motto that has famously distinguished the American financier, one of the richest men in the world: “never invest in a business you can’t understand”. “You have to learn to evaluate companies and know which ones are within your area of expertise and which ones are outside,” Buffett said during an interview with CNBC in 2019.
That doesn’t mean you have to be an expert from every company. Investors must have the “ability to properly value selected assets,” he wrote in his 1996 annual shareholder letter. In general, Warren Buffett likes to focus on companies that have a sustainable business model over a very long period of time. .
Pay attention to the price
Finally, the investment must take place at the right price. Buffett is known as an investor who chooses stocks that are traded at less than their intrinsic value.
“It is much better to buy a wonderful company at a fair price than a fair company at a great price,” reads its annual letter to Berkshire Hathaway shareholders in 1989.