Warren Buffett is arguably one of the most successful investors of all time. He has a net worth of around $105bn. Also known as the Oracle of Omaha, Warren Buffett is very popular for his practical advice and investing guidelines. His most famous quote about investing applies to every investor, beginner or pro.
“Rule number one is – never lose money. Rule number two is – never forget rule number one“
The CEO of Berkshire Hathaway’s response, when asked about his worst investments, was baffling. Surprisingly, Berkshire Hathaway is amongst the worst investment choices of Warren Buffett’s career. Initially, it was a textiles company that continued to decline even when Warren Buffett added it to his portfolio. Since then, the firm has completely changed into what it is today. And he kept his investment to prove that no one is perfect in the investing world.
What is Warren Buffett’s advice on picking stocks?
Warren Buffett’s advice and investment strategies are widely accepted because he chooses to do his research himself. As a result, his experience combined with his insight leads to an investment decision that adds significant value to his portfolio more often than not. That’s why I follow his stock portfolio diligently. Probably one of his most valuable pieces of advice would be, “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price”.
The CEO of Berkshire Hathaway has spent his lifetime investing, and his strategies and advice are no less than golden words. In my opinion, Warren Buffett’s most practical pieces of advice that can be amalgamated into the best stock picking approach for me are:
1. Invest in a company that makes sense to you. Do your research instead of relying on the so-called forecasters, prognosticators, or experts.
2. Look for undervalued companies that can be held for the long term.
3. Hunt companies that have a competitive advantage. And don’t forget to check the durability of that competitive advantage.
4. Focus on long-term averages over five or more years instead of the latest results.
What I’d do to build wealth?
Following Warren Buffett’s advice, I’m looking for great undervalued businesses and have tremendous growth potential. And that’s why I like Qualcomm (NASDAQ:QCOM) and Boeing Company (NYSE:BA).
Boeing holds the position of one of the largest defence contractors and aerospace engineering firms worldwide. With revenue following from both the commercial and government sectors, the group looks primed to grow in my eyes. But like any business, it’s far from risk-free. In recent years some of its commercial airliners have been grounded due to safety concerns. Consequently, competitors like Airbus swooped in to steal market share. Whether Boeing can steal it back is something I’ll be watching closely.
Qualcomm and digital wireless telecommunications are terms used synonymously by investors in this space. Qualcomm holds the competitive advantage because it has established itself as a premier 5G product and service provider. Given the trillion-dollar potential of the 5G industry, I think it’s fair to say the growth potential is there. But just like Boeing, Qualcomm has its risks. Government regulations and tariffs, along with threats of lawsuits over their licensing policy, pose a potentially huge threat. Nevertheless, the current share price seems like a bargain to me. That’s why I think it’s the perfect time to add it to my portfolio.
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Saima Naveed does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned at the time of writing. Views expressed on the companies and assets mentioned in this article are those of the writer and therefore may differ from the opinions of analysts in The Money Cog Premium services.
