Happy Birthday, Warren Buffett! At 89, his wisdom just right for beaten-down D-Street


NEW DELHI: Legendary investor Warren Buffett, who turned 89 on Thursday, is full of life. The third richest man on the planet with $80 billion in personal wealth says loads of money do not make people happier; what does is financial security.

So, the Oracle of Omaha prefers to buy quality stocks at marked down prices.

On a day when the domestic GDP numbers are widely expected to paint a grim picture for the economy and global factors are pitted against equities, here are some of the Buffett gems that can guide Dalal Street investors to navigate these turbulent times.

Greed vs Fear: At present, the domestic market is less greedy and more fearful. Consensus estimate of a cool 20 per cent earnings growth for FY20 has taken a hit and concerns of looming recession in the US and other advanced economies are dragging the equity indices.

Buffett says one must be fearful when others are greedy, as an investor may usually end up paying more than the intrinsic value of a stock in a rising market. On the other hand, when the markets correct heavily, and the overall sentiment is that of ‘fear,’ that can be a good time for value buying.

“Sentimentally, India has suffered a lot of late. The expected earnings recovery did not materialise. A lot of stocks have corrected. The last nail in the coffin could be more fearful, but after a 12-13 per cent decline from all-time highs, I do not expect the benchmark indices to fall another 4-5 per cent,” said Yogesh Mehta, Founder of Yield Maximisers.

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$122 billion Gem
: Why the world’s most respected value investor’s firm Berkshire Hathaway is sitting on a $122 billion cash pile is not difficult to understand now.

US stocks are just 4 per cent below their all-time closing highs and Buffett does not see much value in stocks at these levels. Buffett’s Berkshire Hathaway sold $1 billion worth of stocks in June quarter, which was more than what it bought during that period. This was its biggest net selling since the end of 2017.

In his annual letter earlier in February, Buffett warned that ridiculously high purchase price for a given stock may cause a splendid business to become a poor investment – if not permanently, at least for a painfully long period. “I’ve had periods in my life when I’ve had a bundle of ideas come along, and I’ve had long dry spells. If I get an idea next week, I’ll do something. If not, I won’t do a damn thing,” he once said.

Don’t fear stock fluctuations: By the end of 2018, Buffett’s Berkshire owned $173 billion worth of stocks. Some of Buffett’s exposure often experienced one-day price fluctuations of $2 billion or more. In December quarter of 2018, Berkshire faced a period of high volatility and experienced several days of what he sarcastically called ‘profit’ or ‘loss’ of more than $4 billion. His advice? Focus on operating earnings, paying little attention to gains or losses of any variety.

Never fall short of cash: Buffett said he would never risk getting caught short of cash. “We consider a portion of that stash to be untouchable, having pledged to always hold at least $20 billion in cash equivalents to guard against external calamities,” he wrote in his annual letter this year.

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Buffett avoids activities that could threaten buffer cash. “Berkshire will forever remain a financial fortress. In managing money, I will make expensive mistakes of commission and will also miss many opportunities, some of which should have been obvious to me. At times, our stock will tumble as investors flee equities. But I will never risk getting caught short of cash,” he said.





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