Buffett's Advice Was Always Best, I Just Wish I Always Followed It
Lessons from the Oracle of Omaha as he exits stage right, and how I could have followed his words more closely ... and made more money.
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My first investment muse growing up in the 1980s was Peter Lynch, who preached investing in what you know. That led me to a six-bagger in Chrysler when Lee Iacocca was leading it back from oblivion and my father purchased one of the first K-cars. It also led me to a four-bagger in a local Mexican food concept that had a couple of locations not that far from my dormitory at Arizona State.
For decades, however, it was Warren Buffett who has provided consistent and profound investment advice to millions of American investors. This weekend, the Oracle of Omaha announced he was stepping down in leading Berkshire Hathaway BRK.B after some six decades, although he will remain on as chairman of the board. His departure was not that unexpected, given that his long-time sidekick, Charlie Munger, had died at age 99 in late 2023.
The Oracle of Omaha was widely and justifiably bequeathed as one of the best investors of all time. He would routinely opine on the markets and his quotes around value investing have particularly stuck with me over the decades. Mr. Buffett’s favorite holding period was "forever" and he would frequently quip that in the short term the market was a "voting mechanism," but in the long term it was a "weighing mechanism." His annual fests in Omaha were a mecca for value investors globally. His annual shareholder letter was read by tens of millions for his wisdom on the markets.
The timing of his exit as one would expect is impeccable. Berkshire has grown so big that only a true "whale" would move the needle as far an investment goes. Those really don’t really exist in this market, at least not at a reasonable value. The aptly named Buffett Indicator or the market cap to U.S. GDP ratio has been flashing red for several years now and remains near all-time highs. It is far above the level that it was at the tail end of the Internet Boom, just before the massive bust that followed.
It is little wonder that Berkshire’s cash balance has swelled from $109 billion at the end of 2022 to a record just under $350 billion at the end of the first quarter. Now that Mr. Buffett has given up the leadership of Berkshire, it will most likely morph into a typical conglomerate in the coming years. There will be more of a focus on share buybacks and maybe even the implementation of a quarterly dividend payout.
The one piece of advice I wish I would have adhered to over the decades is Buffett’s take that it is better to get a great company at a good price than a good company at a great price. Over the years, I have bought the dips in names like Amazon AMZN, Apple AAPL and Meta Platforms META, during market pullbacks. It was usually via covered-call positions, and those trades have always turned out to be quite profitable. But my portfolio would have been much better served if I had just adopted the Oracle of Omaha's sage advice and held these names forever.
At the time of publication, Jensen was long AMZN.
