Warren Buffett Strategy: Long Term Value Investing
The Warren Buffett strategy is a long term value investing approach passed down from Benjamin Graham’s school of value. Buffett is considered to be one of the greatest investors of all time. His investing strategy, value, and principles can be used to help investors make good investment decisions.
Long Term Value Investing
Benjamin Graham taught the long term value investing strategy of purchasing stocks at a price below their intrinsic value; then holding them until their price reflects the real value of the company. Warren Buffet described Benjamin Graham’s Intelligent Investor as “by far the best book on investing ever written”.
In the Intelligent Investor Mr. Graham used the parable of Mr. Market to demonstrate how an intelligent investor should exploit the inefficient pricing of securities. This is the foundation of the Warren Buffet strategy of long term value investing.
Related Reading: Investment Decisions Should Be Valuation-Based
Warren Buffet Strategy
Stick With Long Term Value Investing Strategies
Don’t let fear and greed change your investing criteria and values. Avoid being overwhelmed by outside forces that affect your emotions. Never sell into panic.
Invest in What You Understand
Buffet only invests in companies he understands and believes have stable or predictable products for the next 10 – 15 years. This is why he has typically avoided technology companies.
Invest Like You Are Buying the Entire Company
Treat investing in a stock as though you are buying the entire company. I always take a hard look at enterprise value because this is the total price of a company. In other words, it is the price you would be paying for the company if you could buy the whole company at current prices.
Companies with Competitive Advantages
Companies with pricing power, strategic assets, powerful brands, or other competitive advantages have the ability to outperform in good and challenging times. A long term investing strategy requires investing in companies that can weather both good and bad economic times.
Find Quality Companies
Buffet believes in quality investing. He would rather pay a fair price for a great company than a low price for a mediocre company.
Keep Cash On Hand
Investment opportunities become available through broad market corrections or individual stocks that become bargains. These are not predictable events; so cash on hand is an important concept in value investing.
Require a Margin of Safety
Purchasing stocks with a margin of safety below their intrinsic value reduces risk and provides an allowance for unforeseen negative events.
Compounding and Patience
Buffet believes in long term value investing because he understands the power of exponential growth. Companies with sustainable profits can pay and grow their dividends. There are few more powerful long term investing strategies than dividend growth compounding.
Following Warren Buffett
We can study long term value investing by following the Warren Buffett strategy. He has proven to be a disciplined follower of value principles that build wealth over the long term. Use his strategies to improve and sharpen your investment management skills.
Arbor Asset Allocation Model Portfolios (AAAMP)
AAAMP Global Value Portfolio
AAAMP Retirement Growth & Income Portfolio
AAAMP Treasure Trove Twelve Portfolio
Three Asset Allocation Portfolios designed to save you time! The highest priority of each portfolio is minimizing portfolio drawdowns. We focus on ideas and concepts inspired by Benjamin Graham (The Intelligent Investor) and Howard Marks (The Most Important Thing). Focus is on margin of safety, risk management, proper asset allocation, and avoiding behavioral errors!
While Arbor Investment Planner has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability, or completeness of third-party information presented herein. The sole purpose of this analysis is information. Nothing presented herein is, or is intended to constitute investment advice. Consult your financial advisor before making investment decisions.