OFF THE WALL: Warren Buffett’s words of wisdom that I don’t always follow

By Rene Pastor

Warren Buffett is a genius when it comes to picking stocks. His advice is simple, but a lot of folks have a tough time following it.

In an interview with USA Today, he said:

“The nice thing about investing in stocks is that, over time, equities are going to do well.”

“American business is going to do well. America is going to do well. So you have the tide with you.”

“You don’t need to look at the prices of the stocks you own from week-to-week, or month-to-month, or even year-to-year. If you own a cross-section of American businesses, and you don’t get excited (and buy) just at the very top, and if you buy in over time, you are going to do well.”

The typical investor’s first reaction after buying a stock is to look at it obsessively day after day, week after week, month after month. If the stock doesn’t zoom up, the investor starts feeling antsy and thinks ‘maybe I should dump this stock and move on to something else.’ Guilty as charged. I’ve caught myself lots of times looking into my holdings, wondering why a stock isn’t going up. I find myself reaching for the sell button, like a crack addict grabbing for the next fix.

But if you buy the stock of a good American business and just leave well enough alone as the Oracle of Omaha says, you’ll do great. When I think about that adage, I start calming down.

Do I listen to the guys on CNBC? Yes and no.

I listen when they have a CEO as a guest. It is always useful to hear what these guys are going to do with their companies, especially if they are doing well.

I ignore the CNBC people when they spout off on politics because many are just plain…d..b as a stump. These are the same guys urging people to buy Lehman Brothers a few days before it went belly up in September 2008. I do my own readings and the most important thing you can do, look for a price that is about 10 percent to 20 percent below the 52-week high. The most important factor in buying a stock is the price.

The first time I bought Apple stock, my timing was all wrong. The stock was on its way down to below $400 a share. I sold all my shares and sat back to wait. When it finally dropped under $400 and began to rebound around $385, that is when I opened a position. I bought more Apple stock as it made its way higher. Today, it is the biggest holding in my portfolio, accounting for about 13 percent of my holdings. The average price of my shares is still near $400. Apple’s share price has jumped over $500 and is probably on the way to $600.

Another vital thing one should keep in mind is diversify your holdings. Diversification should not just be a mantra for anyone going into the stock market.

I have a four-page long list of stocks I own which contains how many shares I have and the average price of each purchase. Some are known, others are not. I have Visa and American Express, Starbucks and Coca Cola. I also have Grainger, PSA and Trinity. The first three need no introduction.

Grainger is the world’s biggest supplier of office supplies and other equipment. Trinity is the top source of railway cars, barges, and guard rails among other things. PSA is Public Storage where Americans store their household items when they are on the move.

For defense stocks, I go with the two big boys in the sector. The first is Lockheed Martin, the world’s biggest arms manufacturer, and the next is Boeing, which can churn out commercial jet liners and intercontinental bombers.

I set aside about 10 percent of my IRA to invest in under $2 stocks of biotech companies which I think have a shot at making it big. Biotech companies are the stock market’s version of Russian Roulette. I do not know if any of the three companies will hit it big.

If they do, I say half-heartedly to the wife, “maybe you won’t have to work anymore.”

Her reaction? “Yeah right!”

‘Off the Wall’ is a weekly column on the stock market. The comments expressed here are the author’s personal views and are not meant to recommend the buying or selling of stocks.

Leave a Reply