Warren Buffett is one of the legends of stock investing.
We all know his story.
He started investing in stocks when he was just 11. By the time he was 29 years old, he was already a millionaire stock investor. In his 60s, he became a billionaire stock investor.
Often, the biggest question people ask about Buffett is: how does he do it?
And: could I do it too?
Buffett has become rich by buying cheap, or out of favor stocks, and holding them for years.
Sounds easy, right?
If it was, everyone would be able to do what Buffett has done.
However, Buffett does have some secrets that us mere mortal investors can deploy to help us pick great value stocks.
Buffett’s 3 Stock Picking Secrets
1) Buy What You Know
Even investing legends have favorite products. Over the years, Berkshire Hathaway has collected a big roster of well-known companies including Dairy Queen, See’s Candy, and Burlington Northern railroad.
How many of these acquisitions were influenced by Buffett’s own preferences for the products?
In Berkshire’s stock portfolio, one of its longest owned stock positions is in Coca-Cola, which Buffett first began buying in 1988.
Is it a coincidence that Coke is one of Warren Buffett’s favorite drinks? Over the last decade, Buffett has disclosed in interviews to both Fortune and the Financial Times that he drinks 5 cans of coke a day, usually Diet Coke or Cherry Coke.
Clearly, he’s a fan.
But you must do more than just liking a product, to buy the stock.
Buffett has always been an avid researcher and used to order the Annual Reports from companies, when they would send them to you in the mail, to check the financials. He used to have stacks of the reports piled in his garage.
What’s your favorite product or brand?
We often have our fingers on the pulse of every day products and activities, or even of something that is used in our jobs, that might get overlooked by others.
It’s a great way to find value stocks.
Continued . . .
------------------------------------------------------------------------------------------------------
See ALL Zacks’ Long-Term Picks for Only $1
Through good markets and bad, one unique stock-picking method has more than doubled the market’s average gain with an incredible +23.7% per year.
To help you take advantage of opportunities in today’s market, we’re opening the vault to reveal all our long-term recommendations. You’ll see stocks priced under $10… income investments… hidden value stocks and more.
All for just $1.
Special opportunity ends at midnight Sunday, August 25.
See Stocks Now >>
------------------------------------------------------------------------------------------------------
2) Buy Stocks on Sale
This sounds so simple, right?
For years, Buffett has been on the sidelines, waiting for a chance to buy stocks when they went on sale. But in March 2020, when the coronavirus pandemic hit, and the S&P 500 plunged over 20% within just 3 weeks, Buffett did not buy.
In the immediate aftermath of the pandemic, he was heavily criticized for not buying that dip.
But now, nearly 4 years later, with stocks having big corrections and pullbacks in both 2022 and 2023, Buffett has been buying again.
Buffett believes in buying cheap, well-known companies with stellar earnings growth and solid free cash flows.
Buffett Finally Makes His Move
In 2022, Buffett stepped up with his biggest stock purchases in a decade, adding over $50 billion worth of Chevron and Occidental Petroleum to the Berkshire portfolio.
The energy companies fit the bill perfectly as they had single digit P/E ratios, with earnings are on the rise, and record free cash flows.
And he keeps diving in for more even as the energy market has cooled off and oil prices have fallen. He has been dollar cost averaging into Occidental Petroleum since he first bought in in the first quarter of 2022, including buying more in 2024 as the shares retreated. Berkshire’s Occidental position is now worth $16 billion and is the 6th largest in the Berkshire equity portfolio. It now owns over 27% of Occidental.
Buying stocks on sale is the easiest way to invest like Buffett. Any investor can search for value stocks by the classic fundamentals like Price-to-Earnings (P/E), PEG or Price-to-Sales (P/S) ratios.
If you had done so to start 2022, you would have seen buying opportunities in Chevron and Occidental Petroleum, like Buffett did.
It doesn’t get any easier than that.
3) Learn to Pivot and Change Course
Remember when Berkshire Hathaway owned IBM?
Neither do I, but for 7 years, until 2018, Berkshire had a large position in the technology giant.
Originally bought in 2011, Berkshire spent $10.7 billion, buying at the average price of $170 per share, to take a significant stake in the company.
This was going to be Buffett’s big play into technology, an area he had famously avoided for decades.
But it never really worked out. In 2016, shares fell as low as $125.
Buffett decided to sell, and exit the position, notwithstanding one of his most famous pieces of advice, “our favorite holding period is forever.”
Buffett shrugged off the defeat in interviews saying the company never lived up to expectations so he was changing course.
What did he buy instead?
Apple.
In 2016, Apple was cheap with a forward P/E of around 10 and the Street was mostly ignoring it.
That investment has more than made up for the mistake of buying IBM and is now one of the key pillars of Berkshire Hathaway’s business. And even though Berkshire has sold half of its Apple position in 2024, capturing $90 billion in cash as a result, Apple remains the top holding in the Berkshire equity portfolio.
You will make investing mistakes, but the secret is to know when to pivot.
Buffet does it, and you can do it too.
Buffett’s Final Key Ingredient: Discipline
Buffett has one other skill as an investor that’s hard to come by: discipline.
He will wait, sometimes years, to buy a stock, or a company, at a low price.
His discipline paid off in the 2008-2009 financial crisis when he was able to step in and offer financial assistance to struggling banks, offering a $5 billion bailout to Goldman Sachs, for instance, when others were on sinking ships.
He had what his mentor Benjamin Graham, famously called, a “margin of safety.”
This can be achieved by being prepared for pullbacks, corrections or even bear markets.
Many investors, including Buffett, missed out on a buying opportunity in the 2020 coronavirus sell-off.
But even if you missed that buying opportunity, another one is always coming. Just look at the energy sector. It was red hot in 2021 and 2022 but in 2023, it was one of the worst performing sectors, and it remains weak again in 2024.
The market volatility in 2024 has created value opportunities.
Are you ready?
How to Profit from Buffett's Strategy in Today's Market
The Oracle of Omaha explained the essence of his wealth-building like this: "whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down."
There are still plenty of quality stocks at "marked down" prices these days.
The question is, which are the best stocks to buy right now?
Today, you’re invited to access my just-updated Special Report, Invest Like Warren Buffett. It reveals 3 principles Buffett used to build his enormous wealth, plus 5 promising stocks that fit his criteria right now. You can download this report for just $1.
You’ll also get unrestricted access to all the real-time buys and sells from our long-term portfolios, including:
• Value Investor, focused solely on Buffett-style selections and strategy
• Income Investor, highlighting rock-solid stocks paying healthy dividends
• Stocks Under $10, which scoops up low-priced stocks poised to surge higher
• Plus, ETF Investor, Home Run Investor, and more.
This year alone, these private long-term investing services closed 20 double- and triple-digit wins, climbing as much as +263.2%.¹
You'll also get access to Zacks Premium with powerful research, tools and analysis, including the Zacks #1 Rank List, Equity Research Reports, Zacks Earnings ESP Filter, Premium Screener and more.
Zacks Investor Collection enables you to find quality stocks at prices we believe Warren Buffett would love, plus other long-term picks to fit with any investing style.
Don't miss out. This opportunity will end on Sunday, August 25.
Download Invest Like Warren Buffett today and start Zacks Investor Collection >>
Good Investing,
Tracey Ryniec
Stock Strategist Tracey Ryniec is editor in charge of Insider Trader and Value Investor portfolios.
¹ The results listed above are not (or may not be) representative of the performance of all selections made by Zacks Investment Research's newsletter editors and may represent the partial close of a position. Access grants you a comprehensive list of all open and closed trades.
Image: Bigstock
Buffett's 3 Stock Picking Secrets
Warren Buffett is one of the legends of stock investing.
We all know his story.
He started investing in stocks when he was just 11. By the time he was 29 years old, he was already a millionaire stock investor. In his 60s, he became a billionaire stock investor.
Often, the biggest question people ask about Buffett is: how does he do it?
And: could I do it too?
Buffett has become rich by buying cheap, or out of favor stocks, and holding them for years.
Sounds easy, right?
If it was, everyone would be able to do what Buffett has done.
However, Buffett does have some secrets that us mere mortal investors can deploy to help us pick great value stocks.
Buffett’s 3 Stock Picking Secrets
1) Buy What You Know
Even investing legends have favorite products. Over the years, Berkshire Hathaway has collected a big roster of well-known companies including Dairy Queen, See’s Candy, and Burlington Northern railroad.
How many of these acquisitions were influenced by Buffett’s own preferences for the products?
In Berkshire’s stock portfolio, one of its longest owned stock positions is in Coca-Cola, which Buffett first began buying in 1988.
Is it a coincidence that Coke is one of Warren Buffett’s favorite drinks? Over the last decade, Buffett has disclosed in interviews to both Fortune and the Financial Times that he drinks 5 cans of coke a day, usually Diet Coke or Cherry Coke.
Clearly, he’s a fan.
But you must do more than just liking a product, to buy the stock.
Buffett has always been an avid researcher and used to order the Annual Reports from companies, when they would send them to you in the mail, to check the financials. He used to have stacks of the reports piled in his garage.
What’s your favorite product or brand?
We often have our fingers on the pulse of every day products and activities, or even of something that is used in our jobs, that might get overlooked by others.
It’s a great way to find value stocks.
Continued . . .
------------------------------------------------------------------------------------------------------
See ALL Zacks’ Long-Term Picks for Only $1
Through good markets and bad, one unique stock-picking method has more than doubled the market’s average gain with an incredible +23.7% per year.
To help you take advantage of opportunities in today’s market, we’re opening the vault to reveal all our long-term recommendations. You’ll see stocks priced under $10… income investments… hidden value stocks and more.
All for just $1.
Special opportunity ends at midnight Sunday, August 25.
See Stocks Now >>
------------------------------------------------------------------------------------------------------
2) Buy Stocks on Sale
This sounds so simple, right?
For years, Buffett has been on the sidelines, waiting for a chance to buy stocks when they went on sale. But in March 2020, when the coronavirus pandemic hit, and the S&P 500 plunged over 20% within just 3 weeks, Buffett did not buy.
In the immediate aftermath of the pandemic, he was heavily criticized for not buying that dip.
But now, nearly 4 years later, with stocks having big corrections and pullbacks in both 2022 and 2023, Buffett has been buying again.
Buffett believes in buying cheap, well-known companies with stellar earnings growth and solid free cash flows.
Buffett Finally Makes His Move
In 2022, Buffett stepped up with his biggest stock purchases in a decade, adding over $50 billion worth of Chevron and Occidental Petroleum to the Berkshire portfolio.
The energy companies fit the bill perfectly as they had single digit P/E ratios, with earnings are on the rise, and record free cash flows.
And he keeps diving in for more even as the energy market has cooled off and oil prices have fallen. He has been dollar cost averaging into Occidental Petroleum since he first bought in in the first quarter of 2022, including buying more in 2024 as the shares retreated. Berkshire’s Occidental position is now worth $16 billion and is the 6th largest in the Berkshire equity portfolio. It now owns over 27% of Occidental.
Buying stocks on sale is the easiest way to invest like Buffett. Any investor can search for value stocks by the classic fundamentals like Price-to-Earnings (P/E), PEG or Price-to-Sales (P/S) ratios.
If you had done so to start 2022, you would have seen buying opportunities in Chevron and Occidental Petroleum, like Buffett did.
It doesn’t get any easier than that.
3) Learn to Pivot and Change Course
Remember when Berkshire Hathaway owned IBM?
Neither do I, but for 7 years, until 2018, Berkshire had a large position in the technology giant.
Originally bought in 2011, Berkshire spent $10.7 billion, buying at the average price of $170 per share, to take a significant stake in the company.
This was going to be Buffett’s big play into technology, an area he had famously avoided for decades.
But it never really worked out. In 2016, shares fell as low as $125.
Buffett decided to sell, and exit the position, notwithstanding one of his most famous pieces of advice, “our favorite holding period is forever.”
Buffett shrugged off the defeat in interviews saying the company never lived up to expectations so he was changing course.
What did he buy instead?
Apple.
In 2016, Apple was cheap with a forward P/E of around 10 and the Street was mostly ignoring it.
That investment has more than made up for the mistake of buying IBM and is now one of the key pillars of Berkshire Hathaway’s business. And even though Berkshire has sold half of its Apple position in 2024, capturing $90 billion in cash as a result, Apple remains the top holding in the Berkshire equity portfolio.
You will make investing mistakes, but the secret is to know when to pivot.
Buffet does it, and you can do it too.
Buffett’s Final Key Ingredient: Discipline
Buffett has one other skill as an investor that’s hard to come by: discipline.
He will wait, sometimes years, to buy a stock, or a company, at a low price.
His discipline paid off in the 2008-2009 financial crisis when he was able to step in and offer financial assistance to struggling banks, offering a $5 billion bailout to Goldman Sachs, for instance, when others were on sinking ships.
He had what his mentor Benjamin Graham, famously called, a “margin of safety.”
This can be achieved by being prepared for pullbacks, corrections or even bear markets.
Many investors, including Buffett, missed out on a buying opportunity in the 2020 coronavirus sell-off.
But even if you missed that buying opportunity, another one is always coming. Just look at the energy sector. It was red hot in 2021 and 2022 but in 2023, it was one of the worst performing sectors, and it remains weak again in 2024.
The market volatility in 2024 has created value opportunities.
Are you ready?
How to Profit from Buffett's Strategy in Today's Market
The Oracle of Omaha explained the essence of his wealth-building like this: "whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down."
There are still plenty of quality stocks at "marked down" prices these days.
The question is, which are the best stocks to buy right now?
Today, you’re invited to access my just-updated Special Report, Invest Like Warren Buffett. It reveals 3 principles Buffett used to build his enormous wealth, plus 5 promising stocks that fit his criteria right now. You can download this report for just $1.
You’ll also get unrestricted access to all the real-time buys and sells from our long-term portfolios, including:
• Value Investor, focused solely on Buffett-style selections and strategy
• Income Investor, highlighting rock-solid stocks paying healthy dividends
• Stocks Under $10, which scoops up low-priced stocks poised to surge higher
• Plus, ETF Investor, Home Run Investor, and more.
This year alone, these private long-term investing services closed 20 double- and triple-digit wins, climbing as much as +263.2%.¹
You'll also get access to Zacks Premium with powerful research, tools and analysis, including the Zacks #1 Rank List, Equity Research Reports, Zacks Earnings ESP Filter, Premium Screener and more.
Zacks Investor Collection enables you to find quality stocks at prices we believe Warren Buffett would love, plus other long-term picks to fit with any investing style.
Don't miss out. This opportunity will end on Sunday, August 25.
Download Invest Like Warren Buffett today and start Zacks Investor Collection >>
Good Investing,
Tracey Ryniec
Stock Strategist Tracey Ryniec is editor in charge of Insider Trader and Value Investor portfolios.
¹ The results listed above are not (or may not be) representative of the performance of all selections made by Zacks Investment Research's newsletter editors and may represent the partial close of a position. Access grants you a comprehensive list of all open and closed trades.