warren buffett investment strategy

Warrenn Buffett is a real investment guru who earned his enormous assets by investing in capital markets and with strict adherence to certain rules which every investor knows but few respects. In fact Warren Buffett investing strategy may have for ordinary investors more negatives than positives and ultimately may lead to the desired profit.

One of the reasons is the size of transactions and volume of funds which most investors have only dreamed of. Buffett can afford to invest billions of dollars, which his company Berkshire Hathaway has which allows him to buy his interest for shares in companies. At the same time it provides a better bargaining position when entering into the company for an interesting price.

Another related significant difference compared with the ordinary investor is that Buffett often buy shares to own that company (or at least significant part). As an example can be Coca Cola (KO), Wells Fargo (WFC), Procter and Gamble (PG), and last but not least mentioned Burlington Northern Santa Fe Corp. (BNI), which make up the majority of its entire portfolio. He often buy preferred stocks selected companies that give quite an interesting advantage over ordinary investors.

It also reflects the basic principles of long-term investment horizon (and its strict compliance), buying stocks of well-established companies whose functioning well understood by the investor at a low price and limited diversification (with Berkshire Hathaway Buffett owns more than 40 titles from various sectors such as consumer goods, finance, energy, industry, health, etc.).

In recent years, the Buffett and his investment company quite significantly deviates from the established rules which brought him his fortune. The first problem is the purchase of shares of companies in terms of fundamental analysis do not meet his criteria of values and eventually some of them had to quickly get rid of. Examples can be expensive buying shares in recent years, like Anheuser Busch (BUD), Wrigley (WWY.BA), Conoco Philips COP) or two Irish banks, which recorded big losses.

Perhaps the biggest disappointment for many investors seeking to invest on the basis Buffett's rules is a relatively large amount of funds that are kept in derivative instruments. Buffett has always been known for his very negative attitude to derivatives. Even though he sold options with a value of 4 billion U.S. dollars. It is also a fairly risky naked put options.

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Warren Buffett's Recommended Reading List

We're back with the latest iteration of our recommended reading list series. This time around we feature the favorite reads of none other than the Oracle of Omaha himself, Warren Buffett. Over time, he has recommended various books and here is the comprehensive list:

Common Stocks and Uncommon Profits by Phil Fisher: Regarding this book, Buffett said that, "I sought out Phil Fisher after reading his Common Stocks and Uncommon Profits and Other Writings. When I met him, I was as impressed by the man as by his ideas. A thorough understanding of the business, obtained by using Phil’s techniques . . . enables one to make intelligent investment commitments."

The Smartest Guys in the Room by Bethany McLean: This was recommended in Buffett's annual letter from 2003 and details the rise and fall of Enron.

The Intelligent Investor by Benjamin Graham: This is an obvious choice as Buffett has said that this is "the most important investment book" and in particular has highlighted chapters 8 and 20 as essential.

John Bogle on Investing: The First 50 Years by John Bogle. This book is more aimed at the fund investing crowd given Bogle's expertise (Vanguard funds). In the past, Buffett has advocated investors who don't have much time on their hands to invest in index funds.

The Essays of Warren Buffett by Warren Buffett & edited by Larry Cunningham: There's no better way to learn from Buffett than through his own words. Buffett would agree as he says "The most representative book on my thinking is what Larry Cunningham put together."

Sam Walton: Made in America by Sam Walton: Another read Buffett recommended back in 2003, this book details how Walmart was built from the ground up.

And while this next pick is not from Buffett, we wanted to add it to the list because it is an in-depth biography of him. Those of you interested in the investing legend himself should check out The Snowball: Warren Buffett and the Business of Life by Alice Schroeder.


That wraps up Buffet's favorite picks. Make sure to check out some other books recommended by great investors:

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Warren Buffett on Charlie Rose's Show

CHARLIE ROSE: Warren Buffett is here. As you know, he is perhaps the world’s most respected investor. He’s also chairman and CEO of Berkshire Hathaway.

He has been on this program many times. I last spoke with him over a year ago at the peak of the worst economic crisis since the Great Depression. At that time, he said that America had been struck by an economic Pearl Harbor, but much has changed since then, and he’s here to tell us how he views a global and American economy in recovery.

His own company reflects the progress made in recent months. Last week, Berkshire Hathaway struck a $26 billion deal to buy all of Burlington Northern Santa Fe railroad, the largest acquisition in company history. He called the deal an all-in wager on the American economy.He is in New York for a town hall event that he held with Bill Gates at Columbia University yesterday. He graciously agreed to stay over in New York an extra night, and I am pleased to have a good friend of this program and a good friend of mine back at this table. Welcome.

WARREN BUFFETT: Thank you, Charlie. Pleased to be here.

CHARLIE ROSE: Great to see you. It has been, certainly from the middle of 2008 to the middle of 2009, one incredible year.

WARREN BUFFETT: One incredible year. One to a lifetime, I hope.

CHARLIE ROSE: Yes. Tell me about it for you.

WARREN BUFFETT: Well, it was-- it really was an extraordinary time in this country. We came closer to a financial meltdown than certainly any time I have ever seen, and probably in certain respects even -- there was even more panic than the Great Depression, because it came on so fast and so unexpected.

And the whole country wanted to deleverage, corporations, individuals, and fortunately we had a government that responded. It was -- when we talked last, it was a little question of whether Congress would respond like they should. They finally did, and I -- I felt they would in the end. I mean, in the end, they come together for things that are this vital to the country. But we had the right people in Washington. If we’d had a group that behaved like a deer in the headlines, that deer would have gotten run over.

CHARLIE ROSE: So Paulson and Bernanke and Geithner were the right people at the right time, and you don’t know what might have happened if others had been in those positions of power.

WARREN BUFFETT: I can think of others-- I’m not going to name them-- but I can think of others where the ending would have been with us in the abyss rather than just peering down into it.

CHARLIE ROSE: You made some investments during that period.

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52 Must Read Quotes from Legendary Investor – Warren Buffett

Warren Buffett is without question the most successful investor of our time (and possibly of all time). His savvy deal making abilities coupled with his creative and cheerful personality allowed him to achieve success like no other.

While searching the web for the comments he’s made through the years, I found many insightful comments that truly show off Mr. Buffett’s knowledge so I want to share 52 of these with you below! Let me know what you think!

1. A public-opinion poll is no substitute for thought.
2. Chains of habit are too light to be felt until they are too heavy to be broken.
3. I always knew I was going to be rich. I don’t think I ever doubted it for a minute.
4. I am quite serious when I say that I do not believe there are, on the whole earth besides, so many intensified bores as in these United States. No man can form an adequate idea of the real meaning of the word, without coming here.
5. I buy expensive suits. They just look cheap on me.



6. I don’t have a problem with guilt about money. The way I see it is that my money represents an enormous number of claim checks on society. It’s like I have these little pieces of paper that I can turn into consumption. If I wanted to, I could hire 10,000 people to do nothing but paint my picture every day for the rest of my life. And the GNP would go up. But the utility of the product would be zilch, and I would be keeping those 10,000 people from doing AIDS research, or teaching, or nursing. I don’t do that though. I don’t use very many of those claim checks. There’s nothing material I want very much. And I’m going to give virtually all of those claim checks to charity when my wife and I die.
7. I don’t look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.
8. I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.
9. If a business does well, the stock eventually follows.
10. If past history was all there was to the game, the richest people would be librarians.
11. If you’re in the luckiest 1 per cent of humanity, you owe it to the rest of humanity to think about the other 99 per cent.
12. In the business world, the rear view mirror is always clearer than the windshield.
13. Investors making purchases in an overheated market need to recognize that it may often take an extended period for the value of even an outstanding company to catch up with the price they paid.
14. It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.
15. It’s better to hang out with people better than you. Pick out associates whose behavior is better than yours and you’ll drift in that direction.
16. It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
17. I’ve reluctantly discarded the notion of my continuing to manage the portfolio after my death – abandoning my hope to give new meaning to the term ‘thinking outside the box.’
18. Let blockheads read what blockheads wrote.
19. Look at market fluctuations as your friend rather than your enemy; profitfrom folly rather than participate in it.
20. Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac’s talents didn’t extend to investing: He lost a bundle in the South Sea Bubble, explaining later, ‘I can calculate the movement of the stars, but not the madness of men.’ If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases
21. Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.
22. Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results.
23. Of the billionaires I have known, money just brings out the basic traits in them. If they were jerks before they had money, they are simply jerks with a billion dollars.
24. Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.
25. Only when the tide goes out do you discover who’s been swimming naked.
26. Our favorite holding period is forever.



27. Price is what you pay. Value is what you get.
28. Risk comes from not knowing what you’re doing.
29. Risk is a part of God’s game, alike for men and nations.
30. Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.
31. Wall Street is the only place that people ride to work in a Rolls Royce to get advice from those who take the subway.
32. The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.
33. The investor of today does not profit from yesterday’s growth.
34. The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities — that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future — will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands.
35. The only time to buy these is on a day with no “y” in it.
36. The smarter the journalists are, the better off society is. For to a degree, people read the press to inform themselves-and the better the teacher, the better the student body.
37. There are all kinds of businesses that Charlie and I don’t understand, but that doesn’t cause us to stay up at night. It just means we go on to the next one, and that’s what the individual investor should do.
38. There seems to be some perverse human characteristic that likes to make easy things difficult.
39. Time is the friend of the wonderful company, the enemy of the mediocre.
40. Value is what you get.
41. We believe that according the name ‘investors’ to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a ‘romantic.’
42. We don’t get paid for activity, just for being right. As to how long we’ll wait, we’ll wait indefinitely.
43. We enjoy the process far more than the proceeds.
44. We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.
45. We’ve long felt that the only value of stock forecasters is to make fortune tellers look good. Even now, Charlie and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.
46. When a management team with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.
47. Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.
48. Why not invest your assets in the companies you really like? As Mae West said, “Too much of a good thing can be wonderful”.
49. Wide diversification is only required when investors do not understand what they are doing.
50. You do things when the opportunities come along. I’ve had periods in my life when I’ve had a bundle of ideas come along, and I’ve had long dry spells. If I get an idea next week, I’ll do something. If not, I won’t do a damn thing.
51. You only have to do a very few things right in your life so long as you don’t do too many things wrong.
52. Your premium brand had better be delivering something special, or it’s not going to get the business

His savvy deal making abilities coupled with his creative and cheerful personality allowed him to achieve stock market success like no other. So it’s really no luck that he’s named the wealthiest man of 2008 and hope that you’ve learned something from these quotes. Which one is your favorite? Personally, I really like #30 – Never lose money!

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Warren Buffett Speaks: 25 Best Warren Buffett Quotes on His Strategies, Investments, and Cheap Suits

He’s called the Oracle of Omaha, and for good reason: not only is he one of the best investors of all time, but he’s also a witty communicator. If you read one ofBerkshire Hathaway’s annual shareholder letters (BTW–I love their Web site design!), you’ll feel like Warren Buffett is one of the Good Guys–someone you can trust, someone who will tell it like it is, and someone who’s always willing to laugh with you at mistakes.

Here are twenty-five awesome quotes from the man himself. I find these quotes to be especially comforting when you’re ‘financially depressed’–after all, he views a market slump as a good thing!–so I hope these can remind everyone that we just need to do the basics, and we”ll be OK. Be a consistent net saver, buy the market through ups and downs, be a decent human being, and rest easy.

On Investing

1. “Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.”
2. “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
3. “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
4. “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
5. “Why not invest your assets in the companies you really like? As Mae West said, “Too much of a good thing can be wonderful”.”

On Success

1. “Of the billionaires I have known, money just brings out the basic traits in them. If they were jerks before they had money, they are simply jerks with a billion dollars.”
2. “The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.”
3. “You do things when the opportunities come along. I’ve had periods in my life when I’ve had a bundle of ideas come along, and I’ve had long dry spells. If I get an idea next week, I’ll do something. If not, I won’t do a damn thing.”
4. “Can you really explain to a fish what it’s like to walk on land? One day on land is worth a thousand years of talking about it, and one day running a business has exactly the same kind of value.”
5. “You only have to do a very few things right in your life so long as you don’t do too many things wrong.”

On Helping Others

1. “If you’re in the luckiest 1 per cent of humanity, you owe it to the rest of humanity to think about the other 99 per cent.”
2. “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
3. “I don’t have a problem with guilt about money. The way I see it is that my money represents an enormous number of claim checks on society. It’s like I have these little pieces of paper that I can turn into consumption. If I wanted to, I could hire 10,000 people to do nothing but paint my picture every day for the rest of my life. And the GNP would go up. But the utility of the product would be zilch, and I would be keeping those 10,000 people from doing AIDS research, or teaching, or nursing. I don’t do that though. I don’t use very many of those claim checks. There’s nothing material I want very much. And I’m going to give virtually all of those claim checks to charity when my wife and I die.”
4. “It’s class warfare, my class is winning, but they shouldn’t be.”
5. “My family won’t receive huge amounts of my net worth. That doesn’t mean they’ll get nothing. My children have already received some money from me and Susie and will receive more. I still believe in the philosophy – FORTUNE quoted me saying this 20 years ago – that a very rich person should leave his kids enough to do anything but not enough to do nothing.”

On Life

1. “Chains of habit are too light to be felt until they are too heavy to be broken.”
2. “We enjoy the process far more than the proceeds.”
3. “You only find out who is swimming naked when the tide goes out.”
4. “Someone’s sitting in the shade today because someone planted a tree a long time ago.”
5. “A public-opinion poll is no substitute for thought.”

Funny Ones

1. “A girl in a convertible is worth five in the phonebook.”
2. “When they open that envelope, the first instruction is to take my pulse again.”
3. “We believe that according the name ‘investors’ to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a ‘romantic.’”
4. “When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.”
5. “In the insurance business, there is no statute of limitation on stupidity.”

More good sources for Warren Buffet quotes:

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Warren Buffett Quotes

A public-opinion poll is no substitute for thought.
Warren Buffett

Beware of geeks bearing formulas.
Warren Buffett

Chains of habit are too light to be felt until they are too heavy to be broken.
Warren Buffett

Derivatives are financial weapons of mass destruction.
Warren Buffett

I always knew I was going to be rich. I don't think I ever doubted it for a minute.
Warren Buffett

I am quite serious when I say that I do not believe there are, on the whole earth besides, so many intensified bores as in these United States. No man can form an adequate idea of the real meaning of the word, without coming here.
Warren Buffett

I buy expensive suits. They just look cheap on me.
Warren Buffett

I don't look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.
Warren Buffett

I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.
Warren Buffett

If a business does well, the stock eventually follows.
Warren Buffett

If past history was all there was to the game, the richest people would be librarians.
Warren Buffett

In the business world, the rearview mirror is always clearer than the windshield.
Warren Buffett

It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.
Warren Buffett

It's better to hang out with people better than you. Pick out associates whose behavior is better than yours and you'll drift in that direction.
Warren Buffett

It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
Warren Buffett

Let blockheads read what blockheads wrote.
Warren Buffett

Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.
Warren Buffett

Of the billionaires I have known, money just brings out the basic traits in them. If they were jerks before they had money, they are simply jerks with a billion dollars.
Warren Buffett

Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years.
Warren Buffett

Only when the tide goes out do you discover who's been swimming naked.
Warren Buffett

Our favorite holding period is forever.
Warren Buffett

Price is what you pay. Value is what you get.
Warren Buffett

Risk comes from not knowing what you're doing.
Warren Buffett

Risk is a part of God's game, alike for men and nations.
Warren Buffett

Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.
Warren Buffett

Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.
Warren Buffett

Someone's sitting in the shade today because someone planted a tree a long time ago.
Warren Buffett

The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.
Warren Buffett

The first rule is not to lose. The second rule is not to forget the first rule.
Warren Buffett

The investor of today does not profit from yesterday's growth.
Warren Buffett

The only time to buy these is on a day with no "y" in it.
Warren Buffett

The smarter the journalists are, the better off society is. For to a degree, people read the press to inform themselves-and the better the teacher, the better the student body.
Warren Buffett

There seems to be some perverse human characteristic that likes to make easy things difficult.
Warren Buffett

Time is the friend of the wonderful company, the enemy of the mediocre.
Warren Buffett

Value is what you get.
Warren Buffett

Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway.
Warren Buffett

We believe that according the name 'investors' to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a 'romantic.'
Warren Buffett

We enjoy the process far more than the proceeds.
Warren Buffett

We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.
Warren Buffett

When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.
Warren Buffett

When you combine ignorance and leverage, you get some pretty interesting results.
Warren Buffett

Why not invest your assets in the companies you really like? As Mae West said, "Too much of a good thing can be wonderful".
Warren Buffett

Wide diversification is only required when investors do not understand what they are doing.
Warren Buffett

You do things when the opportunities come along. I've had periods in my life when I've had a bundle of ideas come along, and I've had long dry spells. If I get an idea next week, I'll do something. If not, I won't do a damn thing.
Warren Buffett

You only have to do a very few things right in your life so long as you don't do too many things wrong.
Warren Buffett

Your premium brand had better be delivering something special, or it's not going to get the business.
Warren Buffett

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