December 14, 2014

Sage Advice From The Oracle of Omaha

Warren Buffett and his partner Charlie Munger are known as the pioneers of common stock investing. The two gave five tips during the recent Berkshire Hathaway shareholder weekend.

1. Do not envy

The motto at Berkshire is “only the lonely can play.” When other investors are doing better than you, stick to your own discipline instead of envying their profits. Be sure you pay more attention to long-term investments.

2. Hire and build up talent

Buffett shares a similar view with Jim Collins, author of “Good to Great”, that successful investors should “get the right people on the bus”, and work together with them in order to make the company more successful.

3. View competition as the enemy of competence

Both Buffett and Munger believe that one should invest in areas where consensus is high, such as S&P 500 companies. Munger said that “the slowness of what we do causes few to compete with our model.”

4. Value quality, not quantity

Munger introduced Buffett to Fisher’s school of qualitative stock analysis. Everything you need to know about the math of investing you learned by the 7th grade. Don’t overthink things.

5. Avoid being ignorant

Successful common stock investments can take long – at first it seems simple, but actually carrying it out successfully is very difficult. See’s Candies, for example, taught Buffett and Munger about understanding brands. Munger concluded that “investing and business success is about ignorance removal.”

These pearls of wisdom can seem a little trite, or stating the obvious, but they represent the vast experience of two of the world’s greatest investors of all time. Ignore them at your peril.

 

 

About the author 

Erik Conley

Former head of equity trading, Northern Trust Bank, Chicago. Teacher, trainer, mentor, market historian, and perpetual student of all things related to the stock market and excellence in investing.

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