2023 is here and Warren Buffett will be celebrating his 93rd birthday this year.
The Oracle of Omaha is widely acknowledged as one of the most successful investors of our generation.
Between 1965 and 2021, Buffett grew the per share market value of his firm, Berkshire Hathaway (NYSE: BRK.B), by 20.1% per year.
There are many things to admire about Buffett.
But he may be best loved for his ability to present investing ideas in the simplest terms, making investing accessible — something that we, at The Smart Investor, hold dear to our hearts.
As we enter the new year, here are 10 of the greatest 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%.”
The past three years have been anything but certain.
We don’t have to remind you of the unprecedented events that have occurred.
Even as Singapore reopens its borders, its economic recovery is being threatened by the twin threat of inflation and high-interest rates.
Yet, we are glad The Smart Dividend Portfolio, which was launched in January 2020, scored a net asset value return of 28% as of 30 November 2022, during a period when the Straits Times Index (SGX: ^STI) was up 3.6% since our first stock buy.
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.”
If Buffett didn’t spend time predicting where the stock market will go in 2008, you shouldn’t do it for 2023 either.
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.”
In May 2021, the US Federal Reserve signalled that it will not be raising interest rates until 2024. Less than a year later, the US central bank set in motion the fastest increase in rates in decades.
The unpredictable sequence of events is an example why Buffett does not turn down stock buying opportunities due to macro events.
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.”
Stocks are down in 2022 which is tough to stomach. But that shouldn’t distract you from focusing on what’s important, the business behind the stock.
5. Be smart by keeping it simple
“I don’t look to jump over 7-foot bars, I look for 1-foot bars I can step over.”
As an investor, you don’t have to choose the most difficult business in order to score big gains. Simple, understandable businesses such as supermarket operator Sheng Siong (SGX: OV8) can deliver pleasing returns.
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.”
Inflation soared in 2022.
That’s why it’s all the more important for businesses to have pricing power. Without the ability to raise prices, a struggling company may be hard pressed to turn in a decent profit.
7. Take your time to pick the best companies
In baseball, if you fail to swing at three pitches, you will strike out.
Buffett used this analogy to point out the difference between investing and baseball:
“The stock market is a no-called-strike game. You don’t have to swing at everything — you can wait for your pitch.”
Understand the business before you commit your money. Not every falling stock is worth your attention or your money.
8. Keep learning
In 2000, he addressed a group of MBA students on how to become a great investor:
“Read 500 pages like this every day.
That’s how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it.”
If the past three years have taught us anything, there are always more things to learn about businesses and industries as they evolve in the post-pandemic era.
9. Patience is under-rated
Amazon’s (NASDAQ: AMZN) founder and Chairman Jeff Bezos once asked the Oracle of Omaha a simple question:
“Your investment [style] is so simple, why isn’t anyone copying you?”
To which Buffett replied:
“No one wants to get rich slowly”
After a down year in the stock market, many are tempted to throw in the towel. Indeed, the hard part about investing is having enough patience for the results to turn up.
10. As always, think beyond 2023 and for the long term …
“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
From all of us at The Smart Investor, we wish you good luck in investing for 2023, and we hope you will live a long and bountiful life as Buffett has.
Not sure where to park your money in 2023? Give dividend stocks a try. You don’t need a lot of capital to start a stream of passive income. Our latest guide will show you how to invest and where to find the juicy dividends in SGX. Click here to download the report for FREE.
Disclosure: Chin Hui Leong owns shares of Amazon and Berkshire Hathaway.