We are less than 3 weeks away from 2020.
Next year, Warren Buffett will celebrate his 90th birthday.
Buffett is widely acknowledged as one of the most successful investors of our generation. And there is much that we can learn from his wisdom shared over the years.
Between 1965 and 2018, Buffett grew the book value of his firm, Berkshire Hathaway (NYSE: BRK.B), by 18.7% per year. Shareholders that held on to the shares of his firm throughout that period would have enjoyed returns over 20% per annum.
Keeping it simple
There are many things to admire about Buffett.
But Buffett may be best-loved for his ability in presenting investing ideas in the simplest terms, making investing accessible — something that we, at The Smart Investor, hold dear in our hearts.
As we look to 2020, here are 10 of the great quotes from Buffett:
1. In predicting the future, uncertainty is almost always a certainty (from Buffett’s 1994 letter to shareholders)
“We will continue to ignore political and economic forecasts, which are an expensive distraction for many investors and businessmen.
Thirty years ago, no one could have foreseen the huge expansion of the Vietnam War, wage and price controls, two oil shocks, the resignation of a president, the dissolution of the Soviet Union, a one-day drop in the Dow of 508 points, or treasury bill yields fluctuating between 2.8% and 17.4%.”
Extra note: Over the past three years, we have had Brexit, the US-China trade war, oil prices cratering, and interest rates rise, then fall.
Yet, during this time, Stock Advisor Gold, which was launched in May 2016, scored a return of 30.2% over the Straits Times Index’s 7.8% comparable return (as of 30 October 2019).
2. On predicting where the stock market will end up next month or next year (written in October 2008, during the depths of the Global Financial Crisis)
“Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now.”
3. Instead of forecasting where the economy is headed, spend more time studying companies …
“To my memory, I can’t recall us ever making or turning down an acquisition based on a macro factor. We focus on what’s likely to be the average profit, the moat. Any company that has an economist has one employee too many.”
4. Remember, you’re buying a business, not a stock symbol
“Nobody buys a farm to make a lot of money next week or next month. They buy it to make money over the long term. They don’t get a quote every day. That’s a better way to look at stocks.”
5. Being smart is not about taking on the most difficult businesses
“I don’t look to jump over 7-foot bars, I look for 1-foot bars I can step over.”
6. The one thing that a business should have is …
“The single most important decision in evaluating a business is pricing power. If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business.
And if you have to have a prayer session before raising the price by a tenth of a cent, then you’ve got a terrible business.”
7. Meanwhile, have you heard that Buffett hates airlines? (2013 annual shareholder’s meeting)
“Investors have poured their money into airlines and airline manufacturers for 100 years with terrible results. It’s been a death trap for investors.”
8. But by the end of 2016, Buffett poured almost US$10 billion into airlines.
“It’s true that the airlines had a bad 20th century. They’re like the Chicago Cubs. And they got that bad century out of the way, I hope.”
Extra note: No, I don’t think that Buffett was being hypocritical. If you learn something new and critical about a company or industry, then your opinion should change too.
9. The next US Presidential Elections will happen in November 2020. Here’s what Buffett said about the 45th US President, Donald Trump
“I mean, the American economy, you know, we’re up to number 45 or so and we’ve done awfully well. If you mix your politics with your investment decisions, you’re making a big mistake.”
10. As always, think beyond 2020 and for the long-term …
“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
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None of the information in this article can be constituted as financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. Disclosure: Chin Hui Leong owns shares in Berkshire Hathaway.