How To Buy Stocks Like Warren Buffett
In this high tech age where computers become more and more powerful, I just find it funny that the world's best stock investor, Warren Buffett, has managed to stay on top all of these years. You would think that the deep pockets of Wall Street would have been able to find some high tech wizards with deep computer knowledge to trump the guru of Omaha by now. Well, evidently, they haven't.
After investing in stocks for a few years, one day I said – “Ok, it’s time to get serious. Let’s start with a clean slate.” So I decided to research the most successful stock investors around. I read almost all I could on Warren Buffett, as well as read about the successful investors in Jack Schwager's book Stock Market Wizards. Along the way I was always thinking "what is the simple principle to take away?".
These take-aways led me to the conclusion that evidently there is something to this style of investing called Value Investing - popularized by Mr. Buffett. I also realized that these value investing principles were in perfect alignment with the detailed approaches for valuing stocks taught in most business schools.
Alice Schroeder, author of The Snowball: Warren Buffett and The Business of Life, said that she never saw Buffett use computer spreadsheets when he's reviewing investment opportunities. She says he just uses pencil and paper! This observation convinced me that you can be successful by understanding just a few simple principles.
So on to the Buffett trail I focused. And that lead me to an old stock research firm founded in 1931 and still going strong, called Value Line. I remembered Value Line was mentioned during my business school studies as "possibly" providing research that beats the stock market, and now here I was again, finding out that Buffett seemingly swears by the service.
It turns out that Value Line is truly well respected. Here is a public quote from Warren Buffett, himself, I'm sure Value Line never tires of promoting - I know I wouldn't.
"I don't know of any other system that's as good... The snapshot it presents is an enormously efficient way for us to garner information about various businesses... I have yet to see a better way, including fooling around on the internet, the gives me the information as quickly." - Warren Buffett, Berkshire Hathaway, 1998 Annual Meeting speaking about the The Value Line Investment Survey.
So … How do you buy stock like Warren Buffett?
#1. Get A Subscription To Value Line (www.valueline.com)!
It costs less than many other research and data services, and since stock research is their primary business you don't have to worry about biased opinions due to conflicts of interests with other in-house departments.
#2. Learn the simple principle of value investing!
The simple principle of value investing is as follows - "Recognize that the value of something today is likely less than what it will be sometime in the near future before others".
So how do you quickly find a stock that is likely cheaper today than it is tomorrow before others? – Read the Value Line stock summary reports. They regularly rank stocks like seasoned analysts. You don't want to be a seasoned stock analyst, you want to be a savvy investor. So use a Value Line subscription to quickly get a quality shortlist of stock investment possibilities.
Additionally read a book about value investing. One of the best books on value investing I've ever read is amazingly short. It's called The Little Book of Value Investing by Christopher Browne. On Amazon you can buy an electronic copy for $12, a hard copy for $16.
#3. Get a subscription to Better Investing (www.betterinvesting.org)
Better Investing is a not-for-profit investment education site. While there are a lot of good things here - including plenty of warm and fuzzy community oriented stuff - a Better Investing subscription allows you to use their powerful software tool. They call it their Stock Selection Guide (SSG) Tool. Even if you have a degree in economics, finance, or an MBA, using this tool is a must if you are serious about growing your money. I have no idea why their tool is not more popular. I have reviewed it in detail and all I can say it is hands down the best publicly available stock investment tool there is, period!
What makes it so useful? The tool (1) loads historical data allowing you to see trends, (2) allows you to easily make projections about the future (a hint, just use the Value Line estimates unless you know better), and (3) recommends whether or not to buy, hold or sell the stock based on the latest stock price. All of this allows you to quickly make investment decisions based on the conditions of now, not a report written one or several months ago.
You now have some clear and simple steps for buying stock like Warren Buffett. (1) We know that Mr. Buffett has been a regular user of Value Line. (2) We know that he is a value investor. (3) You are now are aware of a tool to help you make the investment decision.
Make stock investing a family hobby. Involve your spouse. Involve your child. Enjoy the knowledge!
G. Mathis Conner is the Founder and Chief Investment Officer of Conner Management Group, LLC, a managed account money manager. He welcomes your questions at email@example.com. Get to know the firm by visiting their website, www.connermg.com and subscribing to their weekly newsletter about investing.