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Why Nobody Wants to Be Warren Buffett

But You Should...

Written by Jason Williams
Posted November 28, 2022

What a crazy title for a financial article, huh? I mean, why on Earth would anyone not want to be like Warren Buffett?

As of this writing, his personal net worth is estimated at over $100 BILLION…

He’s been one of the top 10 richest people in the world since the early 1990s…

worlds richest since 1987

He’s influential in politics and a celebrity investor. And he’s run one of the most successful businesses in the world.

But for some reason, nobody really wants to be Warren Buffett.

And the reason I say that is because it would be incredibly easy to be the next Buffett, but nobody's done it.

His investment strategy isn’t that complicated. In fact, it’s not complicated at all.

But nobody wants to follow it. Even other billionaires have noticed…

“Nobody Wants to Get Rich Slow”

Once, after meeting the Oracle of Omaha, Jeff Bezos commented that he was flabbergasted:

Warren Buffett was able to explain his investment strategy to Bezos over the course of a very brief meeting.

And Bezos, shocked by the simplicity of it, remarked, “Your investment thesis is so simple. You’re the second-richest guy in the world, and it’s so simple. Why doesn’t everyone just copy you?”

To which Buffett replied, “Because nobody wants to get rich slow.”

You see, Warren Buffet didn’t become a billionaire in his 30s like many of the other folks on our richest-people list.

He was a millionaire back then, but it wasn’t until his mid-60s that he became a billionaire.

Now, that’s not to say he wasn’t rich before hitting 60. Being a multimillionaire is rich to most of us.

But he wasn’t rich on a global scale. He didn’t even compare to the people at the top.

Buffett didn’t get rich like Mark Zuckerburg, Bill Gates, Elon Musk, or Jeff Bezos.

They all got their riches in what amounts to one fell swoop. They started a company and took it public, and the massive amount of money in the economy helped make them rich nearly overnight.

And that’s what we all want for ourselves. Because that’s all most of us know about billionaires.

But the thing with people who make their money quickly is that they can lose it just as quickly…

Many were badmouthing Buffett back in 2020 as Bezos' and Musk’s fortunes soared and the Oracle’s actually dropped some.

But Bezos and Musk have lost about $58 BILLION each this year. And Mark Zuckerburg has lost a whopping $90 BILLION.

Talk about losing it quickly!

Meanwhile, Warren Buffett has ADDED around $22 billion to his fortune.

And that’s the reason he’s been such a constant feature on the world’s billionaires’ list.

He does everything slowly. And that includes when he loses money.

But he’s right. Nobody wants to get rich slowly.

Everyone wants that overnight success we’ve seen from people like Bezos and Musk.

But that’s just not likely to happen to everyone.

You’ve got to be in the right place at the right time with the right funding for the right idea.

Lots of people have made electric cars in the past. They’ve been around since the early 1800s.

Elon Musk did it at a time when the world was ready to think about them as a potential means of conveyance.

And lots of people have tried to sell things online and failed miserably.

Jeff Bezos did it at a time when there was enough adoption of the internet to make his business possible.

I’m not saying they aren’t skilled businessmen. But they had a lot of luck on their side as well.

And not everyone is going to be that lucky.

But the thing is, literally anyone can do what Buffett has done…

Buy Low and Sell High

And that’s how he does it. There’s nothing special. There’s no higher math going on.

He’s not tracking charts or reading technical indicators.

He’s buying companies for less than they’re worth and selling them for what they’re worth.

It’s like in real estate when they say that you never make money selling a house; you only make money buying a house.

If you can buy a property for less than the market value, then you don’t have to sell it above market prices to make a profit.

And it’s the same thing with a stock. But that’s another thing…

Warren Buffett doesn’t buy stocks. He invests in companies.

He’s not thinking, “How much can I sell this for in a few years?”

He’s thinking, “How comfortable would I be holding this forever?”

That’s what led him to invest in companies like Coca-Cola and McDonald's.

He understands their business model. He sees their future potential. And he loves the cash they spin off to investors.

Buffett followed a very simple formula to become a billionaire. And he kept following it to become the world’s richest man.

And even when he lost that top spot, he kept following it. And as those “overnight” billionaires continue to lose their shirts, Buffett will continue to slowly regain ground.

And his formula really boils down to those five words: “Buy low and sell high.”

Value Investing

You see, Warren Buffett didn’t even invent his own strategy. He took what someone else had already shown to work and used it himself.

And he focused on lessons learned and then taught by Benjamin Graham, the de facto founder of the school of value investing.

Value investors are like bargain hunters at an estate sale. They’re constantly on the lookout for companies that are being undervalued by the market.

They’re looking for companies that are being sold for less than their intrinsic value. And they’re also looking for good investments that are being ignored by the rest of the market.

It all comes back to a quote from Graham that Buffett loves to throw out there when asked about his investments...

“In the short run the market is a voting machine, but in the long run it is a weighing machine."

What that means is that at different times, different investments are going to be “en vogue.”

During the pandemic in 2020, technology stocks that allowed people to stay locked up inside their houses were very popular, while energy stocks that allowed the world to keep running were not.

There was a point in early 2021 where I pointed out that the entire S&P 1500 energy sector was valued less than the stock of one company, Tesla.

TSLA vs S&P Energy Sector

That’s the kind of situation a value investor lives for.

Energy is the lifeblood of society. Tesla makes flashy cars. Which do we really need to survive?

And it turns out that Warren Buffett saw the same thing I was seeing and his company started loading up its portfolio with energy stocks.

Since then, Tesla’s stock is down over 40% while the energy sector is up over 140%...

TSLA V Energy 2021-2022

But the thing is that Buffett wasn’t thinking that in a year or so he’d be able to flip those stocks for a triple-digit gain.

He was thinking about getting an ownership stake in a business that could generate earnings.

He didn’t care that energy stocks might get popular again. He didn’t have any idea that Russia would invade Ukraine and throw a monkey wrench into the global market.

He just wanted to buy a good company that could make money as a business.

Seven Steps to Success

And to find those kinds of companies, he follows a simple seven-step process where he asks questions about the company in his sights…

First, he looks at the company’s historical return on equity, or ROE. This is how fast an investor can earn income on their shares.

The company should have a record of consistent positive returns that are higher those of than its peers.

Then he looks at a company’s debt.

Many companies try to leverage their growth by taking on lots of debt. But when we get into times where interest rates are rising and debt is expensive, those companies often suffer.

So Buffett wants a company with relatively low levels of debt. That way most of the earnings are coming from shareholder equity and don’t have to be used to pay off interest.

Third, he looks at how much money a company keeps from its sales. This is known as the profit margin or net income margin.

A high profit margin means a company isn’t wasting too much money. And a steadily growing profit margin means management is executing the business plan with extreme efficiency.

Next, Buffett looks at the time a company has been around and operating. He doesn’t want to risk his money on some flash-in-the-pan investment that might not stand the test of time.

So before a company gets his money, it must have at least a decade of experience under its belt.

Fifth, he looks at a company’s economic moat, or what sets it apart from competitors in its industry.

If a company doesn’t really offer anything different from its competitors, it’s not likely to perform much differently from them either.

He also looks at how reliant a company’s products and profits are on commodities. Those are inputs where the market controls the price.

So a company extremely reliant on commodities is one that has a lot of inherent risks of increased costs.

And finally, Buffett wants to see if a company is “cheap.” Is it being sold for less than its intrinsic value?

But to answer this question, Buffett has to determine what that intrinsic value is. And to do that, he looks at the fundamentals:  earnings, revenues, and assets, among other things.

Once he determines the intrinsic value, he compares that with the market capitalization other investors have given the company.

And if that seems cheap compared with the company’s intrinsic value, he buys it and he doesn’t stop until his calculations no longer hold true.

Be Like Buffett

That’s why Buffett’s portfolio is so small for a guy worth over $100 BILLION. It’s hard to find companies that meet those criteria.

But when he does find them, he loads up on them and makes a ton of money on them over the years.

It’s not exciting while it’s happening.

But it sure is exciting a decade down the line when you’ve got more money than you know what to do with (which is a place Warren Buffett often finds himself).

So be like Warren…

Invest in quality companies that will grow their earnings and spin off cash for the long run.

Buy stocks that pay dividends.

But make sure you buy them at low prices so that when you sell them at market rates, you’ll be guaranteed a profit.

And always remember: You don’t make money when you sell an investment; you make money when you buy that investment for less than it's worth.

I hope you all had a nice weekend and that my readers in the U.S. enjoyed the Thanksgiving holiday.

Now, let’s finish this year off right and make the Oracle of Omaha proud.

To your wealth,

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Jason Williams

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After graduating Cum Laude in finance and economics, Jason designed and analyzed complex projects for the U.S. Army. He made the jump to the private sector as an investment banking analyst at Morgan Stanley, where he eventually led his own team responsible for billions of dollars in daily trading. Jason left Wall Street to found his own investment office and now shares the strategies he used and the network he built with you. Jason is the founder of Main Street Ventures, a pre-IPO investment newsletter; the founder of Future Giants, a nano cap investing service; the editor of Alpha Profit Machine, an algorithmic trading service designed specifically for retail investors; and authors The Wealth Advisory income stock newsletter. He is also the managing editor of Wealth Daily. To learn more about Jason, click here.

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