Are You Ignoring Warren Buffett?
The last Saturday in April this year marks the beginning of another Berkshire Hathaway annual shareholders meeting. Held at Berkshire’s hometown headquarters in Omaha, the Woodstock of Capitalism grows bigger and attracts more attention each and every year.
But beneath the spectacle is an opportunity to hear directly from one of the greatest investors in history. Every year, Buffett holds court with shareholders and the press, fielding questions and giving frank, honest answers with his trademark Midwestern wit.
#-ad_banner-#I said this last year, but to put it simply, investors would be wise to pay attention to what Buffett says at this event. At 85 years old, this could be one of the last times we’ll be able to hear straight from the “Oracle of Omaha” about his thoughts on the market, the U.S. economy, and what it means to be a successful investor.
Many of our analysts here at StreetAuthority have attended Berkshire meetings over the years, and they all spoke highly of their experience. But one thing that has always stuck with me about Warren Buffett is that while everyone wants to hear him speak, what often seems to be lost is what Buffett actually says… or more importantly, how few investors seem to actually take Buffett’s lessons to heart and apply them.
Our own Andy Obermueller has been saying this for years. Here’s what he told readers of his premium newsletter, Game-Changing Stocks:
| If you go to the bookstore, you’ll find a whole shelf of books on Buffett… They will be chock-full of his witty aphorisms. His earthy common sense resonates with everyone. No matter the story on the financial channels, Warren Buffett is the one we all gravitate to. He always makes sense, and he always makes money. But no one listens to a word he says. Not really. They process his words. They laugh at his jokes, but people just do not hear what Buffett is saying. I’ve followed Buffett for 30 years. I’ve read all of his shareholder letters, gone to shareholder meetings to hear him talk and read most of the books about him. They all capture Buffett the man. A few restate his investment philosophy. But no one has ever — ever — mirrored his method. |
Andy goes on:
| Everything the man knows is laid out for you to benefit from. But you’ll ignore it… The entire financial world is focused on the income statement. We go nuts for earnings season. Alcoa kicks it off every quarter. Then the big banks make their announcements, all in a row. Hundreds of major companies issue their financials. Wall Street compares them with their estimates. Trading volumes soar. Prices swing. This is madness. The income statement is functionally meaningless. Wall Street’s consensus forecast for any company’s earnings is also meaningless. Buffett knows this. He’s been saying this for years. Warren Buffett DOES NOT buy a company for what it has done. He buys companies for what they will do. And that is not something you can find on the income statement. The income statement is in the past tense. The balance sheet, however, is about the future. |
Andy concluded by saying that if Buffett has taught us anything, it’s that there simply is no “magic formula” for picking stocks. But if you want to be a better investor, then do what Buffett does — forget about the bottom line of the income statement. Read every line of the balance sheet to see what a company will do in the future instead.
Keep this in mind as April 30 approaches. Keeping true to form with the ever-expanding spectacle, the meeting will be broadcast for the first time ever to the wider public via livestream on Yahoo! Finance. I’d suggest tuning in. More importantly, I’d recommend you read Buffett’s annual shareholder letters. They give an unvarnished look at Buffett’s thoughts, and come without all the distractions.
Andy has mentioned this before, and I agree: If you read each and every one of Buffett’s shareholder letters and really study them, then it’s a better value than getting an MBA. And unlike a graduate degree, this education is practically free. (You can read Berkshire’s shareholder letters here. You can also buy an e-book on Amazon that collects all of Buffett’s letters from 1965 to 2014 in one place. It only costs $2.99 and is worth downloading for the modest price.)
P.S. In 2010, after hearing Buffett’s longtime confidant Charlie Munger say he was “immensely optimistic” about solar at the Berkshire shareholder meeting, StreetAuthority’s Andy Obermueller quickly recommended a company called SunPower. Anyone who followed his advice booked a 303% gain in less than three years. Today, Andy is telling his readers about a new energy revolution that’s quietly taking place — and heavy-hitting investors like Bill Gates, Peter Thiel and Warren Buffett are all getting in on the action. To learn more about the mysterious device that could kill OPEC, coal and fracking, go here.