If you’re on an investing blog and you don’t know who Warren Buffett is, I’m not sure what to say. Buffett is our generation’s greatest stock investor. His company, Berkshire Hathaway (NYSE: BRK) has a market cap of nearly $800 billion. Buffett himself has a net worth of over $117 billion, making him the sixth wealthiest person in the world. He is a value investor in the truest sense of the term and is known for his personal frugality. Warren Buffett investing is followed closely by many due to his success.
Buffett was born on August 30, 1930, in Omaha, Nebraska. His birthplace has garnered him the nickname the ‘Oracle of Omaha’, and is the city where Berkshire Hathaway is headquartered.
Buffett learned much of his investing strategies from noted value investor, Benjamin Graham.
He is also partnered with another noteworthy investor and the vice-chairman of Berkshire Hathaway, Charlie Munger.
When it comes to Warren Buffett investing, he’s the real OG. Market leaders everywhere look to him.
How to Invest like Warren Buffett: Value Investing
What is value investing? It is the investing strategy that looks at a stock’s price when it is lower than the company’s intrinsic value. It is, quite literally, buying low and selling high, although Buffett himself does not sell very often.
If you look at Buffett’s portfolio, nothing will really blow you away. He doesn’t take very many risks and he notably doesn’t invest in industries or companies he doesn’t understand.
One of the biggest advantages that Buffett has had is time. His portfolio is a living example of the old saying, ‘time in the market beats timing the market’. Sure, Buffett has made some bad investments, who hasn’t?
He looks at buying stocks in a company as taking part ownership, rather than as a vehicle for capital gains. Buffett believes that if the company can make money in the long–term, the stock price and the market will catch up.
But not all of us have the same advantage of time in the market. Buffett notoriously did not become a billionaire until he was 50. It is said that 99% of his fortune was made after he was 50 years old. So is Warren Buffett investing actually good? Or is he just invested long enough for his stocks to all rise?
Honestly, it’s probably a little of both. A lot of his success has to do with being able to choose the right stocks in the right industries at the right time. The other ingredient for the recipe of success is staying invested for decades.
What Does Buffett Look for in a Stock?
Buffett has a checklist of several characteristics before he decides on investing in a stock.
While many of us often act rashly by buying when a stock has dropped or on specific company news, Buffett bides his time.
He is known to be patient and picky about which stocks he ultimately buys. But hey, with his track record, it’s hard to really argue against anything he does when it comes to investing! Here are a few things Warren Buffett investing tips for what he looks for in a stock.
Does the Company Make Money?
Specifically, is the company profitable? Scanning the Warren Buffett investing portfolio you won’t find many pre-revenue growth stocks. Buffett loves profitable companies with a long history of success and a strong ROE or Return on Equity. Why is ROE important? It is one of the leading indicators of how much shareholders make on their investment.
Warren Buffet Investing Tips: Does the Company Have Good Profit Margins?
Along with making money, Warren Buffett investing asks if the company is making a good profit. Profit margins are a key metric in determining a company’s sustainable profitability.
When looking at profit margins, Buffett looks at the history of the stock. Not only are profit margins a good sign, but if the company is able to grow its profit margins, it means management is putting in the work to continue to grow the business.
Does He Know the Company?
A very important part of the WarrenBuffett investing style is to know the company and the sector. Investing in things you don’t understand can lead to mistakes.
Buffett does not invest in SaaS companies or cryptocurrencies, but he has plenty of other value sectors in his portfolio.
Understanding what you invest in is important for knowing what could go right, but more importantly, what could potentially go wrong.
Warren Buffet Investing Tips: Is the Stock Cheap?
Most importantly, the Warren Buffett investing style is a noted frugal investor. The stocks Buffett invests in generally do not trade at high multiples. When he looks to buy a stock, it needs to be cheaper than the intrinsic value of the company.
This is the crux of value investing and why Buffett has seen such high returns on his investments. Remember, the stock price is different from the stock’s value.
What Stocks Is Warren Buffett Investing In?
Finally, what we’ve all been waiting for. The Warren Buffett investing stocks list. Buffett has made some pretty legendary investments over the years, and I’ll talk about a few of his best.
Looking at Buffett’s portfolio can actually be, well, boring. You won’t find any high-risk lottery tickets here, just solid and profitable American companies. Without further ado, the best investments that Buffett currently holds.
Apple (NASDAQ: AAPL)
It should come as no surprise that the world’s most valuable company makes up a major part of his portfolio.
Buffett bought a 5% stake in Apple in 2016 for $36 billion. In the six years since this investment has ballooned to a figure of over $120 billion.
Buffett owned 887 million shares at the end of 2021, and it now makes up 40% of his investments.
He also makes nearly $800 million in annual dividends from his investment. Berkshire Hathaway is now Apple’s largest shareholder outside of ETFs and index funds.
Bank of America (NYSE: BAC)
Buffett owns over 1 billion shares of Bank of America, a stock he only recently invested in. Berkshire used to own a ton of Wells Fargo (NYSE: WFC), but Buffett traded those in for Bank of America in 2020. Was it a good trade-off? It’s hard to say.
Most big banks move in sympathy to each other as the broader financial sector ebbs and flows. Still, with a 1.92% annual dividend yield, Buffett makes about $1 billion in dividends from his Bank of America position each year.
Coca Cola (NYSE: KO)
Most young investors will find this investment boring, but Coca-Cola has been a Buffett staple since the late 1980s. Buffett’s stake is valued at over $22 billion and his 400 million shares are his third-largest position.
Berkshire Hathaway now owns just under 10% of the company. Since 1994, Buffett has earned at least $22.71 per share in annual dividends from Coca-Cola. You do the math on why Coca-Cola is one of his best investments and continues to be a pillar in his portfolio.
Kraft-Heinz (NYSE: KHC)
Another so-called ‘boring’ investment, Kraft-Heinz is an American foundational company. The returns from Kraft-Heinz have not been as epic as his other positions, but he still makes a 4.07% dividend yield on his 325 million shares. Sure, he’s made billions in dividends from the position over the years, but the performance of Kraft-Heinz since Buffett bought the stock likely puts this in his ‘misses’ category.
Verizon (NYSE: VZ)
A position that Buffett added in 2021, Verizon has a strong 4.99% dividend yield for its stock. Berkshire owns more than 158 million shares, which pay out a pretty penny in dividends each year. Verizon is another boring company but time and dividends can help any investment compound.
Does Buffett Own Bitcoin?
It might seem like a funny question but weirder things have happened. To answer the question, no, Buffett does not own any Bitcoin or any other cryptos. In fact, Buffett has referred to cryptos as rat poison in the past. He shares a similar distaste for gold as well.
The closest thing you will see to cryptos or digital assets for Berkshire Hathaway is owning shares of fintech companies. Buffett did recently invest in a Brazilian crypto-friendly bank called Nubank. He also owns a position in StoneCo (NASDAQ: STNE) which deals with digital payments.
Conclusion
At 91 years old, Warren Buffett has learned a thing or two over the years about investing. He is a core value investor that focuses on strong American brands to carry his portfolio. While you might not agree with the stocks he buys, there are tenets of his investing that are universal.
We should always be looking at profitable companies that can continue to earn profits in the future. Investing in companies we understand and know is crucial to understanding our own investments. Do we all really understand SaaS cloud computing companies, or are we just chasing gains? Finally, and perhaps most importantly, try to stay invested for as long a time period as possible.
Nobody embodies ‘time in the market’ more than Buffett. If there’s anything we have learned from Warren Buffett investing: it’s to buy great companies and hold them for as long as you can.
