Warren Buffett Investment strategy: How to invest like Warren Buffett?

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Warren Buffett Portfolio

Warren Buffet was born on August 30, 1930, and is now 92 years old. He is a big inspiration to investors not only in the US but also in India and across the globe. He has a net worth of $100.2 billion as of August 29 and is the world's seventh richest person. Let us look at his investment strategies and his investments.

Interesting facts about Warren Buffet

Warren Buffett is not only a successful investor but also a great human being. There is so much more we can learn from him other than investing. Below are some interesting facts about him:

  • He made his first investment when he was 11 years old, and by 16 years old, he had more than $53,000 worth of investments.
  • Buffett applied to Harvard Business School. However, he was rejected by the business school.
  • He eats like a 6-year-old, which includes Coca-Cola. He says that if he consumes 2700 calories a day, a quarter of that is Coca-Cola.
  • The best one - he has been staying in the same house since 1958. He purchased the house in 1958 for $31,500 and it has five bedrooms and 2.5 bathrooms.
  • Nearly 94% of his wealth was created after he turned 60 - he is a living example to showcase the power of compounding.

Warren Buffett investment strategies - General Idea

Warren Buffett's investment strategy is simple. He is mostly known for value investing. His company, Berkshire Hathaway, aims to buy an ably-managed business in whole or part that possesses favorable and durable economic characteristics.

He aims to spot undervalued companies with the image of a cigar butt - a used cigar ignored by others but still has a few risk-free puffs left.

Buffett believes in looking at long-term economic value, net of all costs, not just those considered accounting expenses. According to him, to perform a calculation for intrinsic value, investors must invest only in businesses that are not too complex to understand.

Learning from Warren Buffett's investment approach

  • Invest only in companies you understand: You should invest in businesses you understand, and Warren Buffett has done it for most of his life. In the 1990s, IT was growing, and most investors were betting on it. However, he stayed away from it as his logic was that technology was too complex to understand.
  • Read as much as possible for new investment ideas: He is a voracious reader and tells every investor to read every day. By reading, investors can understand new trends and get new ideas.
  • Diversification is good but avoid over-diversification: He believes that diversification only works up to a point, and after a point, it does not help in risk reduction. Hence, investors need not have a large stock portfolio.
  • Invest for the long term: When asked how long he thinks a stock should be held, he always says "forever." You do not have to take it literally, but you get the point - equities are never about the short term.
  • Treat stocks the same way you would treat a bargain furniture sale: He says that when you go to buy furniture, you try to get the best bargain. For stocks, we are fine paying a higher price for a company's share. He says that if you see value in a company, you should chase it at lower prices.

Below are Berkshire's top five holdings:

Berkshire typically holds the majority of its portfolio in just a few companies. At the end of the second quarter, 69% of the company's portfolio value was in the five companies. 

Apple $157 billion 

  • Apple holds the biggest portion of nearly 43% worth $157 billion in Berkshire’s portfolio as of June‘22.
  • Buffett invested in Apple due to its extraordinary consumer franchise & monopoly is the smartphone market.
  • Analysts including Morgan Stanley and Wells Fargo have maintained an ‘Overweight’ rating with the target price of $185 per share.

Bank of America: $36.6 billion

  • Bank of America holds the second biggest portion of nearly 10% worth $36.6 billion of Berkshire’s portfolio.
  • Buffett invested in it due to its strong top management, cheaper valuation and healthy financials.
  • Out of 32 analysts tracking the stock, 65% including Barclays recommend to ‘Buy’ while rest 35% have a ‘Hold’ call on the stock. 

Coca-Cola: $26 billion

  • Coca-Cola holds the third biggest portion of 7.1% worth $26 billion in Berkshire’s portfolio as of June 2022.
  • Buffett invested on it as Coca-Cola was a monopoly and undervalued relative to its growth potential.
  • Analysts including Morgan Stanley and UBS have maintained an ‘Overweight’ rating with the target price between $72-74 per share.

Chevron: $25.8 billion

  • Chevron is the new comer in the top 5 list with 7% of Berkshire’s portfolio worth $25.8 billion as of June 2022.
  • Buffett is adding more Chevron due to its cheaper valuation and rising crude oil prices globally.
  • Analysts including Wells Fargo and B of A Securities have maintained an ‘Overweight’ rating with the target price between $180-185 per share.

American Express: $24.6 billion 

  • American Express is the fifth biggest stock holding 6.7% of Berkshire’s portfolio worth $24.6 billion as of June 2022.
  • Buffett became bullish on the stock due to its great top management, strong brand and customer loyalty. 
  • Analysts including Morgan Stanley and Barclays have maintained ‘Equal-Weight’ rating with the target price between $155-160 per share.
  • Who is Warren Buffett and why is he famous?

  • How many companies are in Berkshire Hathaway's portfolio?

  • What is Warren Buffett invested in?

  • What is in Warren Buffett's portfolio now?

  • What is the best investment according to Warren Buffett?

  • What are the 4 stocks Warren Buffett invested in?