Ten Strategies to Invest Like Warren Buffett

1) Sticking With What You Know and Can Easily Understand

The next hot biotech or technology stock is too obscure for Buffett — and he is a billionaire a few dozen times over. Buffett’s success has been largely tied to sticking with what he knows. His main operations are insurance, industrials, utilities, and rails. His top stock holdings are familiar companies for many Americans as well — American Express, Coca-Cola, Wells Fargo, and IBM. Many of his private companies also operate along straightforward business models, including Heinz, GEICO, Fruit of the Loom, Netjets, and a dozen or more jewelry, furniture, and retail outlets.

Apply that to your own investing and focus on products you use and companies you can easily value. Investing in companies connected to your own profession is another way of sticking to what you know.

2) Having a Forever Outlook

Buffett once said that his ideal holding period was forever. As a reminder, Buffett first invested in Coca-Cola in 1988 and has never sold any stock. Buffett has also held onto American Express through thick and thin for years. Buffett first bought American Express shares so long ago, and at such a low price, that the company’s current low dividend is actually quite high for him on a cost basis. Thinking like a futurist has helped Buffett’s investing endeavors. Patiently waiting for industry trends to play out over a decade or two is a key component of a Buffett investment.

3) Investing in Value, at the Right Price

Warren Buffett believes in value investing and is a student of the valuation techniques pioneered by the great Benjamin Graham. 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. Also, Buffett may not ever pay a dividend to his Berkshire Hathaway shareholders, but he loves investing in companies that offer dividends and buybacks. These investments can lower your cost basis or help you build cash for other opportunities ahead.

That said, Buffett has tweaked his approach over the years. For for the longest time he would not chase technology stocks or companies. They changed too fast, had short track records, and carried expensive valuations. Buffett broke this pattern when he amassed a major stake in IBM in recent times. Still, he never chases “the next home run,” such as 3D printing, social media or biotech.

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