Berkshire Hathaway founder and chairman Warren Buffett has offered a variety of investment advice over the years. Known for taking a long-term approach to stocks, sticking to fundamentals and taking calculated but thoughtful risks, the so-called Wisdom of Omaha is a frequent move online.
Buffett and his longtime business partner and friend, the late Charlie Munger, are known for their no-nonsense approach to business. Keep things simple and avoid alarmist tendencies. In fact, Buffett once touted the benefits of looking at a company’s balance sheet instead of its income statement before making an investment decision because it’s “harder to hide or play games.”
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He went on to note that Wall Street often ignores the document, adding, “You learn more from balance sheets than most people give them credit for…”
Quote of the day from Warren Buffett
“You judge management by two standards: how well it runs the business and how well it treats shareholders.”
What does Warren Buffett’s quote mean?
At Berkshire Hathaway’s 1994 annual meeting, Buffett explained to the audience why he buys corporations with “good governance” and what he means by that qualifier. The question of how to recognize good management was asked by an “average investor” in the audience.
With an ace investor, you can judge whether a business has good management by reading what they and their competitors have been able to achieve and how much capital they have allocated to their successes over time. “You have to understand a little bit about the hand they were dealt when they got the chance to play themselves,” he added.
He went on to note that to draw those conclusions, you also need to understand the business the company operates in and see how well management has “done playing its cards.”
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As for the second parameter – how they treat their shareholders, Buffett noted that while it can be a bit more difficult to determine, there are several examples. “I think you usually find that … Bill Gates or Tom Murphy or Don Keough or people like that are really excellent managers. And it’s not hard to figure out who they’re working for,” he said.
He added that most would not be able to make judgments about managers on a personal basis, but could form an opinion by reading company reports. “So, you know, read the proxy statements, look at what they think, how they treat themselves and how they treat shareholders, look at what they’ve accomplished, consider what the hand they were dealt when they took over compared to what’s going on in the industry. And I think you can figure it out sometimes,” he added.
Buffett and Munger have consistently expressed that they rely heavily on their list of requirements when making business decisions. In a 2021 interview with CNBC, Buffett told the channel that you can’t make a good deal with a bad person.
Who is Warren Buffet — the ‘Oracle of Omaha’?
Warren Buffett, along with friend and business partner Charlie Munger, were the architects who transformed Berkshire Hathaway Inc. over nearly 60 years. from a failing textile manufacturer to an empire worth billions. Decades of compounding returns have made the pair of billionaires and folk heroes adoring investors.
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Notably, in January of this year, Buffett handed over the reins and the position of CEO to successor Greg Abel. However, his “bull run” with Berkshire is legendary – over 60 years (1964-2024), he generated over 55,00,000% returns, built the group to $1.2 trillion and expanded its Class A shares to a value of $167 billion.
Known as the ‘Oracle of Omaha’ for his mysterious stock forecasting, Buffett gained fame and investor confidence by picking companies (Apple, Bank of America, Coca-Cola, etc.) that exploded and now make up 70% of Berkshire’s $263 billion stock portfolio. He called it how “one great deal can balance out the many mediocre decisions that are inevitable”.
Buffett’s net worth is estimated at $152 billion, making him the 10th richest person in the world, according to the Bloomberg Billionaire Index.
