Regular BloggingStocks readers know by now that my investment strategies are fairly conservative and relatively coarse. Please don't begrudge me that. Although I don't track my picks in a portfolio, I do mentally track the general performance of the companies I tout, and I believe that overall I've done fairly well.
There are two major differences between my stock-picking efforts and what I perceive to be Warren Buffett's style. First, Mr. Buffett has years of experience that I myself do not have. Second, Mr. Buffett likes to have a greater working understanding of the nature of the businesses he chooses to investment in than I do. I choose my companies of favor with what I call my "big picture" strategy. All that means is that I use a broader view than most of my contemporaries who like to dig right down to the very roots of their picks.
I like to think that my strategy provides solid conservative support, which shall then free an investor to do some aggressive speculating with their profits.
For me, fundamentals must be solid, almost beyond doubt, but the profit margins can be less than most stock pickers aim toward. Barring any unforeseen key management shake ups or serious product failures, I tend to trust the fundamentals to hold relatively stable in the companies I choose by simply having taken a good historical view of the company's overall performance going back one to three years.
- Consider the trending for the company over the past 52 weeks.
- Consider trending of the company's product sector.
- Consider overall consumer trending, fads, fashion, holy grail.
- Consider availability of new capital for the product sector.
- Look for solid companies that are stupidly undervalued.
- Look for stupendous product innovation releases.
- Associate with innovators.
- Diversity, both geographically and in product, is paramount to me.
- Name recognition is critical.
If I had put money on companies that I've pointed toward as good conservative investment choices, the following are companies (in no specific order) that I'd now hold a position in. Additionally, I'd be holding no bonds, except possibly local municipal bonds, at this time.
- John Deere & Co. (NYSE: DE)
- Limited Brands (NYSE: LTD)
- General Electric Co. (NYSE: GE)
- Google Inc. (NASDAQ: GOOG)
- Yahoo! Inc. (NASDAQ: YHOO)
- Luxottica Group (NYSE: LUX)
For an excellent snapshot of Warren Buffett's portfolio and style, please review the BloggingStocks series of posts, Examining Warren Buffett's Portfolio, by Brent Archer.
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Reader Comments (Page 1 of 1)
7-08-2007 @ 12:31PM
Michael Schneider said...
As Warren Buffet has stated "Don't copy us." Of course many investors have done well by just imitating or following The Oracle. Nevertheless, I think you are right in going with your own style and what you think and what you feel comfortable with as long as you have enough time to put into the market to do it right. Legendary investor Peter Lynch used to put a long list of investments he missed in his books- everything from Internet stocks to baseball cards. The same could be done for Warren Buffett who missed the huge Internet and tech rallies and also good opportunities to buy big drug stocks and utilities and tobacco companies at incredibly cheap prices. He was late into energy and may also be missing some of the ag boom. If you just follow Warren Buffett you would miss some great stocks and maybe be getting in too late to some of the places where he already has racked up gains. He has said that he is limited now because his company has gotten so big-- so he is buying more big stocks (also they are relatively cheap), a constraint smaller investors don't have to face. The best is to develop a style or system that works and you feel comfortable with in your financial circumstances. Still, it does help to attend to thoughts and actions of great investors. Items on Warren Buffett and other great billionaire investors such as Edward Lampert, Carl Icahn and Carlos Slim are available free for those interested in the new Billionaire Watch section (top, yellow label) at http://www.Barrelomoney.com. .