Warren Buffett has exited his role as chairman of Berkshire Hathaway (NYSE: BRK), a position he held for decades. This departure follows his stepping down as CEO of the conglomerate nine months ago, marking the end of his direct leadership at the company he led for over 60 years.
The article outlines three core principles from Buffett’s investment style that are frequently cited by analysts:
- Long-Term Strategy: Buffett emphasizes buying and holding stocks for extended periods. He notes that he bought his first stock at age 11 for $38 per share and sold it at $40, learning a lesson in patience as the price eventually climbed over $200. He has stated, "Our favorite holding period is forever," citing Berkshire's continued ownership of Coca-Cola (NYSE: KO) since 1988 as an example.
- Buy What You Know: This strategy involves investing in companies where the investor is a familiar consumer or has conducted thorough research. Buffett invested in Coca-Cola as a consumer and studied GEICO after learning from Benjamin Graham. He visited the GEICO headquarters and met with Lorimer Davison, the CEO, to understand the business before investing.
- Value Investing: Buffett focuses on companies with understandable business models, predictable earnings, and an "economic moat." He advises against investing in businesses one cannot understand. He invested in Apple (NASDAQ: AAPL) in 2016 after determining the valuation was proper, and the company is now the largest holding in Berkshire's portfolio.
While Buffett generally prefers holding stocks indefinitely, he is willing to sell if valuations do not align with his expectations. An example cited is his purchase of airline stocks followed by their sale in early 2020 during the pandemic, as he anticipated an industry oversupply and slow recovery.
