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24/7 Wall St.: Investing Like Buffett May Be More Common Sense Than Magic

By John Morgan   |   Monday, 09 Jun 2014 01:27 PM

Many people want to invest like Berkshire Hathaway's Warren Buffett, but don't want to chase the stocks he has already bought.

24/7 Wall St. identified a handful of strategies to help ordinary speculators invest like Warren Buffett.

Thinking longer term is one key to the Buffett success strategy, the news service noted. In fact, just four long-time holdings — Coca-Cola, IBM, American Express and Wells Fargo — make up 56 percent of the holdings at Buffett's Berkshire Hathaway investment vehicle.

Editor's Note:
250% Gains Bagged Using Secret Calendar (See Video)

Another reason Buffett is successful is because he sticks to what he knows, according to 24/7 Wall St. "The next hot biotech or technology stock is too obscure for Buffett. . . . His main operations are insurance, industrials, utilities and rails."

Buffett also sticks with value investments, not hot momentum stocks. "Buffett typically screens for companies that have low debt, offer a strong return on equity, and have a favorable price to earnings ratio. A clean balance sheet is, of course, a must," and "he never chases 'the next home run,' such as 3D printing, social media or biotech," 24/7 Wall St. said.

In addition, Buffett does not invest in risky turnaround stocks or companies with unproven management, although he is not above taking a thoughtful plunge on beaten-down stocks.

"Buffett has a proven track record of intervening in companies hit by recession, including Bank of America, Goldman Sachs, General Electric and Dow Chemical."

Buffett also has a habit of continuing to acquire shares in a given stock if the price continues to stay low. An example of how tends to keep "buying on the cheap" is his stake in Wells Fargo, which he has continued to buy more of since the recession.

Other smart Buffett-like strategies, according to 24/7 Wall St., include "keeping your powder dry" in the form of cash reserves to take advantage of unforeseen opportunities and maintaining a wary eye on tax liabilities.

"One easy-to-recognize reason that Warren Buffett holds onto stocks for so long is because of the tax implications. Some periods are better to lock in capital gains than others, and, all else being equal, growth is magnified through time if the ultimate tax burden can be deferred for years and years."

Pearls of wisdom directly from Buffett himself do not always come cheaply.

The winning bidder last week to have lunch with Buffett, part of his charitable auction held on eBay, paid $2.2 million for the privilege, Channel NewsAsia reported. The winner was a man named Andy Chua, who is from Singapore. The proceeds from the auction go to a San Francisco anti-poverty program.

Chua is the chairman of AMES United, which runs a chain of more than 100 beauty and grooming centers across Asia with 1,600 employees.

AMES United began as hair-loss treatment company in 1984. It has since launched two other brands — London Weight Management and New York Skin Solutions, Channel NewsAsia reported.

Editor's Note: 250% Gains Bagged Using Secret Calendar (See Video)

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Many people want to invest like Berkshire Hathaway's Warren Buffett, but don't want to chase the stocks he has already bought.
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