I’m a shameless Warren Buffett fanboy.

By now, readers know the news. Buffett will be stepping down as CEO of Berkshire Hathaway at the end of the year. Brad and I devoted yesterday’s episode of The Wide Moat Show to Buffett. And this week’s Wide Moat Dailies have been a celebration of the Oracle of Omaha.

To be clear, Buffett isn’t going anywhere. He’ll still be CEO through the end of the year. And even after, he’ll remain chairman of the board. And I’m sure his shadow will still loom large at Berkshire Hathaway.

Still, it’s the end of an era to be sure. And it’s one worth celebrating.

I loved some of the essays that Brad wrote earlier in the week. His “Wait for Your Pitch” piece was especially touching.

Like Brad said, Mr. Buffett is a big baseball fan. As am I. Buffett has used baseball analogies to make the stock market relatable for decades. That’s probably why his words have always resonated with me.

I also got a kick out of Brad’s Little League picture. I couldn’t be happier to be reliving those days right now, coaching my daughter.

Seventeen years ago, I drove from Charlottesville, Virginia to Omaha, Nebraska to watch my University of Virginia Cavaliers play in the College World Series.

That was shortly after I began my investing career. While I was there, I took a downtown detour.

I found Berkshire Hathaway’s offices, spoke to the doorman, who allowed me to speak to a secretary, who politely informed me that no, Mr. Buffett was not available for an unexpected meeting.

I was honest… I said I just wanted to shake his hand and tell him how grateful I was for all of the lessons that his writings had taught me.

Alas, that meeting didn’t happen.

But my Wahoos won, making the trip to Omaha worth it.

Lessons To Live By

As I said in yesterday’s Wide Moat Show episode, I truly believe Buffett’s annual letters to shareholders offer better financial education than any business school in America.

Better yet, they’re all free. Right here, to be precise.

There is a lifetime’s worth of wisdom from the best investor who ever lived on those pages.

And so, today, I thought I’d share a few choice lessons from Warren Buffett. They’ve been transformative for me. I’m sure they will be for you.

It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.

This quote is the basis for just about all of my personal investments. When Buffett began his investing career, he was a strict disciple of Benjamin Graham. He wanted the deepest value he could find.

In fact, his acquisition of Berkshire Hathaway in 1965 – then a struggling textile company – was motivated precisely by that. It looked like a good value.

But, as his career progressed, he took advice from his longtime business partner, Charlie Munger (rest in peace), who convinced him to also focus on quality, not just value.

The issue with many deep value stocks is that they’re cheap for a reason. Usually, that reason is a good one.

That isn’t to say that deep value stocks can’t turn around and create a lot of wealth for the shareholders who bought them low. But it’s a risky proposition.

Usually, the line between a great value and a value trap is a blurry one. Instead of navigating those murky waters, I’d rather just buy predictable blue chips that I can count on. That allows me to sleep well at night while still compounding my wealth.

Obviously, I’d love to have both (a very high-quality company trading at an attractive valuation). The problem is that opportunities like that don’t happen often. We’re always on the lookout for those rare deals in The Wide Moat Letter. But at the end of the day, I’m happy to simply pay a fair price for a wonderful company.

Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.

This is a lesson that I’m trying to implement more and more as I get older. Looking back at my investing career, the biggest regrets that I have aren’t about losing money. I regret all of the money that I left on the table because I wasn’t aggressive enough.

It’s not often, but when the market hands you a gift, you back up the truck and take it. In the pages of The Wide Moat Letter, we’ve tried to apply that lesson.

When the COVID crash came in March of 2020, we broke out our bucket and recommended:

  • Lowe’s (LOW): up 237%

  • Mastercard (MA): up 188%

  • Altria (MO): up 102.2%

  • Broadcom (AVGO): Sold for a 706% gain last month

Buffett is right. He so often is. Great opportunities come infrequently. Don’t be fearful and miss them. Be greedy. When it’s raining gold, fill up your bucket.

You want to be greedy when others are fearful. You want to be fearful when others are greedy.

I just hinted at this one… and it’s cliche at this point, I know. But it’s still the type of quote that every investor should have taped to their mirror. Read it every morning before the market opens.

Fear and greed rule the markets. They dictate short-term share price movement and oftentimes inspire investors to do exactly the wrong thing (buying high and selling low).

This is why most retail investors underperform the major indexes. This is why so many people believe that the market is rigged. It’s not… we just let the worst parts of our human nature take over.

It’s hard to go against the grain, but trust your research. Trust your analysis. Trust in the numbers… not your emotions. Your emotions will betray you. Fundamentals are real.

Over the long term, fundamentals win out. Every time.

So focus on sales, earnings, and cash flows. Let them be your guide. And be willing to leave the herd and profit from its mistakes.

Our favorite holding period is forever.

This one is straightforward. Time is an investor’s best friend. It’s what allows the compounding process to play out. As the old saying goes, time in the market is more important than timing the market. I wholeheartedly believe that. So did Warren Buffett and Charlie Munger.

Along these same lines, here are a few more choice Buffett quotes on the topic:

The stock market is designed to transfer money from the active to the patient.

If you aren’t thinking about owning a stock for 10 years, don’t even think about owning it for 10 minutes.

Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years

Amen…

Remember, the vast majority of traders fail. Disciplined and patient investors, on the other hand, tend to be winners. Don’t rent stocks. Own businesses.

It’s a subtle difference, but an important one.

Here’s what Buffett had to say about short-term trading.

Half of all coin-flippers will win their first toss; none of those winners has an expectation of profit if he continues to play the game.

Keep things simple and don’t swing for the fences. When promised quick profits, respond with a quick “no.”

I know, it can be boring targeting roughly 10% returns every year when there are speculative stocks in the headlines skyrocketing higher. But the fact is, those bets involved extremely high risk. And those risk levels lead to way more strikeouts than home runs.

Regarding patience and perspective, Buffett said:

Someone’s sitting in the shade today because someone planted a tree a long time ago.

Here’s one of my favorite quotes he said regarding chasing highly speculative stocks:

Investors should remember that excitement and expenses are their enemies.

Lastly, I want to leave you with a couple of things that he’s said that transcend the stock market and have the potential to make us all better people.

It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.

Tell me who your heroes are, and I’ll tell you who you’ll turn out to be.

That last one is perfect.

One of my heroes is Warren Buffett, and I can only hope to display the discipline, patience, work ethic, and level-headedness that he has throughout the rest of my investing career.

May we all be so lucky.

Regards,

Nick Ward
Analyst, Wide Moat Research