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.
3 Secrets to Picking Great Value Stocks Like Buffett
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 have to 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 everyday 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.
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.
Over the last 2 years, he was heavily criticized for not buying that dip.
But now, 2 years later, with stocks having their worst start to a year in decades, and the S&P 500 again in a bear market, Buffett has been buying again.
Keep Reading . . .
------------------------------------------------------------------------------------------------------
Get Private Picks from Zacks’ Long-Term Portfolios
Through good markets and bad, one unique stock-picking method has more than doubled the market’s average gain with an incredible +24.8% per year.
To help you take advantage of rare opportunities in today’s market, we’re opening the vault to reveal all our long-term recommendations. You’ll see stocks priced under $10… high-paying dividend stocks… Buffett-style value stocks and more. All for just $1. Special opportunity ends at midnight Sunday, June 26.
See Zacks' latest value recommendations >>
------------------------------------------------------------------------------------------------------
Buffett believes in buying cheap, well-known companies with stellar earnings growth and solid free cash flows.
In 2022, Buffett has stepped in 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 have single digit P/E ratios, as earnings are on the rise, and record free cash flows.
And he keeps diving in for more, with news that he was dollar-cost averaging on Occidental Petroleum this summer as the shares have pulled back off recent highs. He now owns nearly 17% 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 P/E, PEG or Price-to-Sales 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.
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 skill as an investor that’s hard to come by: discipline.
He will wait, sometimes years, in order 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.
And here we are in 2022 with another bear market. And now Buffett is diving in.
2022 has been a great year for value investors.
Are you ready for all the stock deals?
Profiting from Buffett’s Strategy in Today’s Market
The Oracle of Omaha has raked in hundreds of billions of dollars – and he has revealed his secret in plain English. As he puts it, "whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down.”
There’s no shortage of “marked down” stocks with rock-solid fundamentals these days. Investors who get into great stocks at today’s prices are positioning themselves for spectacular gains over the longer-term. Warren Buffett clearly believes this is the case.
But which are the best stocks to buy right now?
Today, I'm offering you a chance to see which stocks we believe have the most promising upside for the months and years ahead. In Zacks Investor Collection, you get unrestricted access to all the real-time buys and sells from our long-term portfolios for just $1, including:
• Value Investor, focused on Buffett-style selections and strategy
• Income Investor, with solid stocks paying healthy dividends
• Stocks Under $10, which is scooping up low-priced stocks poised to surge higher
• Plus, ETF Investor, Home Run Investor, Zacks Confidential, and Zacks Top 10 Stocks for 2022.
Last year alone, these private long-term investing services closed 68 double and triple-digit wins. There have already been 21 more in 2022. Gains have reached as high as +188.3%, +348.7% and even +995.2%.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.
When you look into Zacks Investor Collection, you’re invited to download the latest edition of our 5 Stocks Set to Double special report. Five Zacks experts each pick their single favorite stock to gain +100% or more in the next 12 months.
This unique arrangement enables you to find quality stocks at prices we believe Warren Buffett would approve of – and extra resources to help find your own winners.
Don’t miss out. This opportunity will end on Sunday, June 26.
Start Zacks Investor Collection and see our 5 Stocks Set to Double now >>
Good investing,
Tracey Ryniec
Tracey Ryniec, Zacks' insider and value strategist, is editor in charge of the Value Investor portfolio.
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.
Image: Bigstock
How to Pick Great Value Stocks Like Warren Buffett
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.
3 Secrets to Picking Great Value Stocks Like Buffett
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 have to 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 everyday 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.
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.
Over the last 2 years, he was heavily criticized for not buying that dip.
But now, 2 years later, with stocks having their worst start to a year in decades, and the S&P 500 again in a bear market, Buffett has been buying again.
Keep Reading . . .
------------------------------------------------------------------------------------------------------
Get Private Picks from Zacks’ Long-Term Portfolios
Through good markets and bad, one unique stock-picking method has more than doubled the market’s average gain with an incredible +24.8% per year.
To help you take advantage of rare opportunities in today’s market, we’re opening the vault to reveal all our long-term recommendations. You’ll see stocks priced under $10… high-paying dividend stocks… Buffett-style value stocks and more. All for just $1. Special opportunity ends at midnight Sunday, June 26.
See Zacks' latest value recommendations >>
------------------------------------------------------------------------------------------------------
Buffett believes in buying cheap, well-known companies with stellar earnings growth and solid free cash flows.
In 2022, Buffett has stepped in 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 have single digit P/E ratios, as earnings are on the rise, and record free cash flows.
And he keeps diving in for more, with news that he was dollar-cost averaging on Occidental Petroleum this summer as the shares have pulled back off recent highs. He now owns nearly 17% 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 P/E, PEG or Price-to-Sales 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.
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 skill as an investor that’s hard to come by: discipline.
He will wait, sometimes years, in order 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.
And here we are in 2022 with another bear market. And now Buffett is diving in.
2022 has been a great year for value investors.
Are you ready for all the stock deals?
Profiting from Buffett’s Strategy in Today’s Market
The Oracle of Omaha has raked in hundreds of billions of dollars – and he has revealed his secret in plain English. As he puts it, "whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down.”
There’s no shortage of “marked down” stocks with rock-solid fundamentals these days. Investors who get into great stocks at today’s prices are positioning themselves for spectacular gains over the longer-term. Warren Buffett clearly believes this is the case.
But which are the best stocks to buy right now?
Today, I'm offering you a chance to see which stocks we believe have the most promising upside for the months and years ahead. In Zacks Investor Collection, you get unrestricted access to all the real-time buys and sells from our long-term portfolios for just $1, including:
• Value Investor, focused on Buffett-style selections and strategy
• Income Investor, with solid stocks paying healthy dividends
• Stocks Under $10, which is scooping up low-priced stocks poised to surge higher
• Plus, ETF Investor, Home Run Investor, Zacks Confidential, and Zacks Top 10 Stocks for 2022.
Last year alone, these private long-term investing services closed 68 double and triple-digit wins. There have already been 21 more in 2022. Gains have reached as high as +188.3%, +348.7% and even +995.2%.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.
When you look into Zacks Investor Collection, you’re invited to download the latest edition of our 5 Stocks Set to Double special report. Five Zacks experts each pick their single favorite stock to gain +100% or more in the next 12 months.
This unique arrangement enables you to find quality stocks at prices we believe Warren Buffett would approve of – and extra resources to help find your own winners.
Don’t miss out. This opportunity will end on Sunday, June 26.
Start Zacks Investor Collection and see our 5 Stocks Set to Double now >>
Good investing,
Tracey Ryniec
Tracey Ryniec, Zacks' insider and value strategist, is editor in charge of the Value Investor portfolio.
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.