Happy Birthday, Warren Buffett!
Today, Buffett turns 93 years young.
Many people are a lot richer because of him.
Buffett started a partnership in 1956 in his hometown in Omaha, Nebraska.
His first investors were family and friends.
If you were fortunate enough to invest $10,000 with him, it would now be worth over $370 million!
That’s the reason Buffett is called the “Oracle of Omaha.”
Buffett is also one of the greatest philanthropists of this generation.
Beginning in 2006, he’s given steady annual payments to the Bill & Melinda Gates Foundation and to four foundations connected to his family.
His annual donations so far have totaled $51 billion.
Buffett has pledged to give more than 99% (current net worth $119 billion) of his wealth to philanthropy during his lifetime or at his death.
In my book, Getting Started in Value Investing, I wrote how “his life is an example of what happens when wisdom, ethics and benevolence converge.”
And “like his teacher Benjamin Graham … Mr. Buffett has continued the tradition of passing on an investment philosophy to all those who will listen.”
Upon receiving the manuscript Buffett responded that he really appreciated the dedication…
“It is certainly true that I am where I am today because I had a great teacher in Ben Graham. If I can pass on a fraction to others of what he passed on to me, I will be happy.”
So in honor of Buffett’s Birthday…
Here are three big takeaways I learned from Buffett that changed the way I think … and have made me boatloads of money.
Now, I want to help you do the same.
#1: Stocks as a Business
“If you own your stocks as an investment — just like you’d own an apartment, house or a farm — look at them as a business. If you’re going to try to buy and sell them based on news or something your neighbor tells you, you’re not going to do well… Find a good bunch of businesses and hold them.”
— Warren Buffett
Buffett never made predictions. Instead, he asked himself if he’d like to own a quality business and hold it.
Stock price tells you nothing about the business.
Behind every ticker, there’s a company.
Figure out the worth of the company and buy the stock when it is trading below that value.
Eventually, the stock price follows the business.
Nothing more complicated than that.
#2: Volatility Is Your Friend
“The stock market is there to serve you and not to instruct you.”
— Warren Buffett
I call it ETV: Embrace the Volatility.
Mr. Market usually does a pretty good job pricing stocks.
He keeps the stock price pretty close to the underlying worth of the business.
Most of the time he gets it right … but once in a while, he’s way off the mark.
And when that happens… Mr. Market offers us great prices.
I don’t sit around sucking my thumb. Instead, I take advantage of the mispricing immediately.
And the reason is simple: I don’t know how long the stock price will stay at a great price.
Because other intelligent investors will eventually buy the stock, bidding the price higher and the opportunity is over.
One example from my Alpha Investor portfolio is Uber Technologies (NYSE: UBER).
Uber was added to the portfolio at $47.
It dropped all the way to $20 making it one of our worst-performing stocks … but we continued to like the stock … even more.
Why? The stock price was trading at an even greater bargain than when we recommended it.
Besides, we’re long-term investors and we won’t be shaken out by panic.
Instead, we looked at the drop as an opportunity. I told subscribers to buy — because Mr. Market screwed up.
Uber is now at $44 … making readers who bought during volatility 100%+ gains.
#3: Mega Trend Tsunami
“To swim a fast 100 meters, it’s better to swim with the tide than to work on your stroke.”
— Warren Buffett
The real talk is … mega trends take time.
They start off like little ripples and develop into tsunami waves.
The way to make money with them is finding the best business in the industry and riding the wave.
That’s why the first criteria in my Alpha-4 Approach to identify the Alpha Market — the next mega trend:
These are decades-long trends. And here are my top three that are only getting started and should continue to pick up momentum in 2024 and beyond:
Mega Trend 1: Semiconductors: The world is going to need more chips, not less as everything becomes digital.
From electric vehicle production, to artificial intelligence, to the next smartphone … everything needs chips.
The demand will only continue to increase while the supply can’t keep up.
Mega Trend 2: Health care: People are getting older and living longer in the United States. In 2020, 17% of the U.S. population was over the age of 65…
A figure which is expected to reach 22% by 2050.
The cost of health care will only increase and so will the types of surgeries … knee replacements (count me in), cataracts and pacemakers.
Health care is a trend that will continue for the next few decades.
Mega Trend 3: Alternative asset managers: There are huge pools of money looking to make higher returns than traditional stocks and bonds.
And alternative asset managers invest in assets other than stocks and bonds — such as private equity, real estate infrastructure and credit markets.
By 2030, close to 20% of Americans will be over the age of 65, with more than $33 trillion in retirement assets.
Nearly $60 trillion in wealth is expected to be passed down to heirs through 2042.
It’s estimated that the alternative asset management industry is currently at $14 trillion and growing … making this mega trend a tsunami wave 100 feet high.
The Alpha Way
Warren Buffett is the GOAT investor — the greatest of all time. He has shaped my career and his wisdom impacted my life.
And I hope to use his lessons to help you make wheelbarrows of money bucks in the stock market by making investing simple.
You won’t hear me throw Wall Street jargon at you. Just the Alpha Investor way…
We don’t invest because others agree or disagree with us.
We invest because our facts and analysis are right.
We are confident in our decisions and don’t need confirmation.
We don’t stay in the middle of the pack … we lead.
We are not afraid of stepping out.
We think differently than other investors.
THAT’s how we make money.
And I hope you echo these lessons back to me on my 93rd birthday. 🙂
Founder, Alpha Investor
Is the Job Market Finally Cooling Off?
The past three years have really forced me to dig deep into my memories of undergrad economics.
It seems we’ve encountered all sorts of things that I had read about in books, but had never seen in the wild. I wasn’t even sure if they were still possible in the modern world.
At the top of the list is the dreaded “wage-price spiral.” This is the situation where inflation pushes prices higher, forcing workers to demand higher pay to stay afloat.
But higher wages end up fueling even higher prices, as companies are forced to charge more in order to make up for their rising costs. The result is a vicious cycle of prices and wages pushing each other higher, while no one really comes out ahead.
The tight labor market of the past few years have been a major driver of inflation, which in turn has led to demands for higher wages. And it seems no one is really coming out ahead on this hamster wheel.
But we might legitimately have relief in sight.
The number of job openings and actual hirings have tended to move together over time. Just before the COVID-19 pandemic, the numbers started to get a little out of whack. And then following the pandemic, they got skewed beyond all recognition.
The number of job openings massively spiked above the number of hires, implying that many jobs were going unfilled … and helping to fuel inflation.
Higher wages aren’t the only way that a labor shortage fuels inflation. Lower productivity from younger and more marginal recent hires also contributes. Since 2020, we’ve had both of these scenarios in play.
In March 2022, job openings peaked, and they’ve been trending lower ever since. The July numbers, which were published this week, show that the trend is actually accelerating. The Fed’s hawkishness is helping here, as is the fact that companies are learning to get by with fewer workers.
Let’s be clear: It’s still a ridiculously tight labor market, and the wage-price spiral isn’t disappearing tomorrow. But it’s at least starting to trend in the right direction.
Ultimately, the only real “cure” for the wage-price spiral is a major productivity boost.
And that’s coming!
The massive investments in robotics automation and AI we’re seeing today will pay off in the not-too-distant future — in higher productivity and lower inflation.
Want to invest in the AI trend? Go here to learn more about Ian’s #1 AI stock pick.
Chief Editor, The Banyan Edge