Robert Miles, visiting American author and authority on Warren Buffett, the world’s most accomplished investor, exclusively addressed an audience on the billionaire’s easily learned investment beliefs and practices - as well as his mistakes. In his brief visit to Australia, Robert shared the floor with Mark O’Hare, Partner at Grant Thornton Australia. The duo engaged the audience with personal anecdotes about the wealthiest man alive, plus insights around the ways in which the soon to be 86-year-old has been able to bank himself $65 billion to date, as well as the highlights from this year’s Berkshire Hathaway annual meeting.
Here are 4 of Warren Buffett’s top investment tips from the event:
Investing is a stocks game. More specifically, the play is in buying stocks that are trading below their value. If they’re not trading up, don’t buy them. This is the quantitative or measurable value of Buffett’s technique. Investing in something today that will worth more in the future, put simply - a stock valued at $1.00 for 50c, or quality ‘marked-down’. Alternatively, Buffett says all investing is figuring out what you can take out of the investment in its useful life, discounting it back to today, and attempting to buy it cheaper.
Heroes come in many forms. Benjamin Graham, author of The Intelligent Investor, was Buffett’s former college professor. Two chapters of this book in particular, 8 and 20, resonated strongly with Buffett. In Chapter 8, the premise of thinking of stocks as businesses is explored - because thinking about stocks that way, means thinking as an owner, not a trader. In Chapter 20, it’s the allegory of Mr Market - a way of explaining the traits of stock market fluctuation, that enlightened Buffett. Smart investors, he says, should treat Mr Market as a servant, not a master. Going against the grain and controlling emotions on the floor is a hard thing to do, but can be very rewarding.
Patience is needed to build wealth. It can take up to 10,000 hours to master anything - and Buffett has had many 10s of thousands of hours to study-up. His competitive advantage was waiting for the perfect business opportunity to come along. Without ever starting or operating his own business, Buffett has created enormous wealth by investing in other people’s businesses. Businesses that were the most uncomplicated considerations gained his attention, and money.
Disciplined principles in business can be learnt. Buffett has 12 investment lessons that provide a good framework, and many are as humble as they sound. The top 3 are identified as (1) choosing a simple business - Buffett didn’t choose rapidly changing business because their futures were too hard to predict on. (2) When it comes to finances, high return on equity is of utmost importance - the higher the percentage, the higher the interest should be in it. (3) For management, looking for someone who possesses rational, integral and energetic characteristics, plus a good IQ, is imperative.