Warren Buffett, Oracle of Omaha

Lessons in Strategy from the Oracle of Omaha

We all know of the Oracle of Omaha and his words of wisdom. But with the 2016 Berkshire Hathaway Annual Shareholders Meeting next week, I thought it fitting to reiterate some of Warren Buffett’s consistent thoughts, which have been the lifeblood of his successful track record.

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“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”

Following the herd is a great way to claim plausible deniability. But it’s also a sure way to let others do the thinking for you. To truly stand out as a thought-leader, it’s vital to beat others to the not-yet-identified trend. 

“Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.”

Like the fast-fashion industry, markets can create erratic love-hate relationships. With many market participants giving too much weight to their emotions, especially when feedback loops echo good or bad news, it’s not surprising to see valuations become too high or too low. Rather than helping the herd reach one of these outcomes, wait for the dust to settle before making your move. 

“Only when the tide goes out do you discover who’s been swimming naked.”

It’s crucial to always be prepared to back up your actions. More than likely, the day will arrive when your testimony is required, and you don’t want to be caught overexposed.

“A public-opinion poll is no substitute for thought.”

It’s great to utilize existing data from surveys. But even the most well-conducted polls still have margins of error to account for inaccuracies. So, ultimately, your own due diligence is fundamental. All people are entitled to their opinions. But only yours will be backed with your own analysis.

“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

With publicly traded stocks, investors have immediate access to real-time price quotes. But this convenience can be more of a curse than a blessing when coupled with daily analyst sound bites, distracting an intelligent investor from his or her long-term strategy. The real test is being able to differentiate significance from noise.

“Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.”

We’ve all been faced with tough decisions, tending to prolong the inevitable by resisting it when the best solution would be to face it head on. Indeed, the latter requires material changes. But it will pay dividends to posterity. While changing course is rarely easy, if it will help in the long run, it’s best to do it now. 

“Today, people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value.”

Imagine going to the gym three time a week but not seeing any results. This would be frustrating and baffling. But this is what it’s like to hold cash and cash equivalents—non-performing assets that, at best, keep up with inflation. But most people don’t find this frustrating or baffling because they believe they are avoiding risk. Yet in reality, the biggest risk is being totally risk averse.

“Price is what you pay. Value is what you get.”

Though quipped by his mentor, Benjamin Graham, Buffett has repeated this adage many times. Truly, it is the backbone of the ultimate tenet of investing: buy low; sell high. A wise way to accomplish this is to buy something with a price-value discrepancy, where the value exceeds the price. Years ago, Buffett famously likened this tactic to finding discarded cigarette butts each with one [free] puff remaining.

“Someone is sitting in the shade today because someone planted a tree a long time ago.”

While hindsight is 20/20, it takes true vision to employ foresight. Anything meant to stand the test of time requires strategic planning and execution. With regular maintenance, fruits will be reaped in the years to come.

“Basically, when you get to my age, you’ll really measure your success in life by how many of the people you want to have love you actually do love you.”

While Buffett has spent decades compounding money, he’s done so in a way that has garnered renowned respect: abstaining from hostile deal-making, giving autonomy to Berkshire’s managers, and acting ethically. With 35,000+ people from across the globe anticipated at this year’s annual meeting, Buffett is clearly loved by many, and highly successful according to his measurement.

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If you are interested in participating in this year’s Berkshire Hathaway Annual Meeting but cannot make it to Omaha’s CenturyLink Center, consider viewing Yahoo Finance’s live stream of the event on April 30 at 9 a.m. CST.

If you liked this blog, you might also like A Look at the Fed’s December Rate Hike.

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