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Investors could do worse than follow the advice of Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) CEO Warren Buffett. The legendary investor has built up a wealth of track record over his long and distinguished career. Since taking over as head of Berkshire Hathaway in 1965, his stock has generated a compound annual growth rate of 20%, and by the end of 2020 has brought in a whopping 2,810,526%.
On this clip of Motley Fool Live, registered on February 26, “The Wrap” host Jason Hall and Fool.com contributors Danny Vena and Brian Stoffel each share a quote from the Oracle of Omaha they’ve learned the most about.
Jason Hall: Warren Buffett’s annual letter to shareholders is expected to drop tomorrow. What I wanted us to answer is that, let’s face it, he’s probably the best investor of the last century, maybe the best CEO of the last century. Definitely the best combination of these two skill sets in one individual, at least in my life for sure.
What I thought it would be fun to talk about were the lessons you’ve learned from all the concise things he’s said and written over the years. What’s the best lesson you learned from the Oracle of Omaha. Danny, are you ready to start on this one?
Danny Vena: I’m ready. I know the quote is not being used in the way that Buffett intended. But that said, it is always the one that taught me the most and it is: “Be greedy when others are afraid and fearful when others are greedy”.
The fact that it was yesterday was a 25% drop day on Fool live, it got me thinking about that and the fact that when the whole market is down, when all is going down, so there isn’t necessarily something wrong with the companies you have invested in, everything is falling across the board and this is where the best deals can be made.
I look at the companies that I have followed, which I know I trust, for which I have convictions. When I see one of these companies go down 20%, or 25%, or 30%, or 35%, or 40% because the market is down and everything is selling, then I am confident that I can be greedy when the others are afraid. and I can buy this stock.
This is one of the things that has really helped me as an investor. If I know a business well and can see that what I believe is a pricing error, I have no qualms about pursuing it.
Room: Brian, what are you saying here?
Brian Stoffel: I’m going to share a quick story, you’re going to have to make me happy and that’s because it was Warren Buffett’s reading that brought me to the Motley Fool. The only reason I read about Warren Buffett is because for those who don’t know, I have no background in finance before entering the Motley Fool. I had never even taken an economics course, I still haven’t.
Room: It’s often seen as a feature and not a flaw here.
Stoffel: Yeah. It was heartwarming to know that Dave and Tom were both like English majors, they loved the theater. I never did a theater, but I was an English major.
The point is, I was looking for a biography to read because my wife had just started a teaching job and I chose Buffett because he was a member of the board of trustees of my college, little Grinnell College in Grinnell, Iowa, for decades. He was the reason that when I was in college, the money he could accumulate for college exceeded $ 2 billion for 1,500 students while I was there. It paid me to be able to go and be a speechwriter in Washington, DC during one of my summers in college and it was so exciting.
I wanted to know, what did he do to be able to do this? If you ever get the chance, read Snowball, her biography because she will teach you a lot of things. One of the things you will learn from this is that Buffett always said, “Don’t confuse investing well with being successful in life. They are not the same things, not for a long time. ” It’s something I believe in my bones.
I think one of the reasons he does as well as he does is because I think he enjoys what he does. He’s talking, I remember, four or five years ago, he and Charlie just jump at work, they pinch themselves so they can do the things they can do.
This may not be the case for a lot of people. You have to find your thing that works for you like this and that will likely change over the course of your life too. But I think the reason he’s always in the position that he is and doing what he is, isn’t because he wants to be the most successful. I don’t think it bothers him, but I think it’s because he really enjoys it. My quote is “Never confuse doing well with investing and doing well in life.”
Room: It’s fantastic. Mine is one of his very simple, very short and I’m going to dwell on that a little bit and it’s, “ Someone is sitting in the shade today because someone else has planted a tree a long time ago. ”
The way I think of this in the context of investing is that I build wealth. I am building something. I’m not trying to take anything.
You think about trading, you think about selling, having these mechanical stocks like you own a stock and it doubles, you sell half to get that money off the table or one of those other short term mindset approaches.
I think of the difference between cutting flowers and growing trees to chop wood to build a house. As an investor, what I’m trying to do is try to build something really, really big. It is much easier and it takes a lot less labor to grow trees than to cut flowers.
This is how I think about this approach and this is how it informs my way of thinking about our investment. He said this a long time ago and I still use it pretty much every day, I think about that one. It’s fun for me.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.
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