Read this article to find out how to succeed in investing based on Warren Buffett's strategy.
Warren Buffett, the so-called Oracle of Omaha, is no doubt the most influential investor around today, standing out from the crowd with his setup trading philosophy and methods. In the stock market world, his name is associated with value investing. A reputation that makes him a fervent supporter of long-term investment.
Born on August 30, 1930 in Omaha, Warren Buffett was introduced to the world of the stock market at an early age. At only 11 years old, he bought his very first shares. He then began his career delivering newspapers while working alongside his father. At the time, the family business was still specialized in brokerage.
Very quickly, his entourage noticed that he was more attracted to the business world than to long studies. For this reason, Warren first entered the Wharton School of Finance and Commerce in Pennsylvania. Later, he transferred to a university in Nebraska.
With an economics degree in hand, Warren Buffet hoped to break into Wall Street, but was turned down by Benjamin Graham. Disappointed, the young graduate returned to his hometown and worked as a stockbroker for Buffet-Falk & Co.
His dream came true when Benjamin Graham contacted him again to offer him a position at the Graham-Newman company. Once Graham retired, Warren Buffet, who was only 26 years old at the time, created his first company. Thus, Buffet Associates Ltd was born. Its capital increased rapidly and exceeded the one million dollar threshold in 1961.
The acquisition of the first shares of Berkshire Hathaway, a struggling textile company, marked the beginning of his career. Warren Buffett transformed it into an investment company that could compete with the leaders of the stock market. Moreover, his new position allowed him to invest in these same companies. Since then, his portfolio has grown steadily, approaching $70 billion in 2020.
The Oracle of Omaha owns about 50 stocks that are specifically dedicated to the US market. Technology is a dominant part of his portfolio, though it took him some time to take an interest in the sector and to invest in it.
Today, Apple investments make up one third of his capital, alongside Bank of America, Coca-Cola Company, American Express and Wells Fargo stocks, constituting around 70%.
Warren Buffett also owns a sizable portfolio of shares in the banking sector. These investments are considered his Achilles heel, as this sector is the most vulnerable in the event of a recession.
According to the Global Industry Classification Standard (GICS), in addition to technology and finance, his capital is well distributed in the following areas :
The majority of his shares pay dividends. They are automatically redeemed when stock market conditions are optimal. This is done to maintain the level of their share price.
It should be noted that Warren Buffet favours a long-term investment strategy. As long as the companies on which the entrepreneur has bet maintain a competitive advantage, he keeps his shares.
Warren Buffett is particularly well known for his value investing method. This trading setup was developed by his mentor Benjamin Graham, and its principle is to buy undervalued stocks.
The student has long since surpassed the master. Warren Buffet refined his technique by focusing on three important points in target companies:
Finally, investor Warren Buffett banks on three vital elements of these companies' financial reports: