When others are selling, Warren is buying

D Murali | Updated on May 04, 2012


As stock prices decrease, the prospects for investment increase. This is one of the simple tenets highlighted by Mary Buffett and David Clark in The Warren Buffett Stock Portfolio ( Build up a cash reserve and allocate it when prices are most in your favour, the authors explain. “Warren does this on an individual company basis. He is not watching the market – he is watching the price of a company's stock, and he is keeping his eyes on a lot of different businesses.” Of value in the book is the detailed discussion of seventeen investments in Warren Buffett's portfolio, such as American Express, Coca-Cola, Costco, GlaxoSmithKline, Moody's, Wal-Mart, and Washington Post. What he wants to own are companies that have some kind of durable competitive advantage over their competition, the authors note. “He wants to own these companies for as long as possible and to buy them at the cheapest price possible. Which usually means during a bear market.” The book cautions that a common problem with most investors is that they are preconditioned to buy in a bull market. This, as the authors elaborate, means that such investors never have a stockpile of cash on hand, which means that when a bear market hits, they lose money, get upset, and then do not have the cash needed to take advantage of all the great prices.

Instructive wisdom for investors.

Published on May 04, 2012

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