NEW DELHI: Warren Buffett turned 91 today. A value investor, Buffett has been investing since 1941, when he was 11. In 80 years of his compounding journey, he shared words of wisdom in dozens of his annual letters and Berkshire Hathaway AGM speeches, which have earned him the stature of a legend in investing community.
Gaurav Sud, Managing Partner at Kanav Capital Advisors, said one of the Buffett’s lessons that can aptly apply in this phase of the market is that it’s time spent in the market, and not timing the market, that makes the real money. Sud said one who stays 100 per cent in the market for the long term and does not sell just because the market is at its peak makes handsome retturns.
Even an investor who put in money at the 2008 Sensex peak would be sitting on nearly 3 times return at Monday’s close of 56,889.
Sud, the IITian-turned-value investor, said how the stock markets are performing globally today only add credibility to Buffett’s view that equity as an asset class by far gives the best return.
Buffett paid a $7 tax in 1944 when he was 14 years old. His income that year was $592.50. At the age of 21, his net worth was $20,000. It took him 13 years to become a millionaire and 33 years to become a billionaire at the age of 55. The billionaire investor says the stock market is designed to transfer money from the active to the patient.
Buffett, also known as Saint of Ohama, says: “It’s far better to buy a wonderful company at a fair price, than a fair company at a wonderful price.”
In India, a total of 460 stocks on BSE have hit their all-time highs in August and over 1,500 scrips have climbed over 200 per cent from their 52-week lows. Many of the stocks may not be worth investing in at all. Many others would be investible but mediocre businesses.
“Look at HDFC Bank or Nestle India, they have been a classic cases of wonderful companies. Whenever a value investor would have looked to buy those stocks in the past, s/he would have found them a bit expensive. But what you found expensive then could be a reasonable or fair valuation, when the long-term demonstrable growth is factored in,” Sud said.
For value investors, Warren Buffett’s words are like gospel. He even inspired many market gurus in India.
In November last year, market veteran Raamdeo Agrawal at an event revealed that he did not know who Buffett or his company Berkshire was until 1994. But once Agrawal’s friend asked him to study Berkshire’s balance sheet, those 30 pages, Agrawal said, opened his eyes.
“I realised I knew little of investing. Buffett became my guru,” he said at the event.
With $104 billion net worth, Buffett today is the ninth richest person on earth.
Raamdeo said he used to read one Berkshire balance sheet of the 1965-1994 period every day.
“That changed me completely. If one reads Buffett’s annual letters from 1965 to 1994, that is where the actual Buffettology lies. He wrote those letters with his own hands. I learnt from them immensely. I converted my portfolio of 25 shares into 15 companies. I had doubled the portfolio the same year. Since then, I have never had an unfocused strategy,” Agrawal said last year.
Buffett says one should never invest in a business that s/he doesn’t understand. Why do first-time investors get nervous every time the market hits fresh high is the fact that they simply have not done their homework.
Buffett at Berkshire’s AGM this year had a simple piece of advice to first-time investors. “It’s (stock investing) not as easy as it sounds.”
The ace investor cited how none of the world’s top 20 most valued companies of 1989 were in the same list 30 years later. Buffett feels ordinary investors are better off investing in index funds than in individual stocks.