Finding the best shares to buy now isn’t an easy task. Quantifying what makes a particular share the best one is quite subjective. So it’s best for me to hear from someone who has an opinion worth listening to. To this end, Warren Buffett is respected as one of the top investors of all time, shown via the performance of his company, Berkshire Hathaway. He’s currently 90 years old, and so has plenty of advice given out over the years about stock picking that I can benefit from.
Trying to find undervalued shares
Warren Buffett is quoted as saying that “price is what you pay, value is what you get”. I think this is applicable when searching for the best shares to buy now. The essence of the quote is that I want to get good value for the price at which I buy the stock.Â
A great share to buy now would be one that’s undervalued. In this way, I’m getting more value than the price currently offered reflects. I can try and identify undervalued shares via different financial ratios.
For example, a low price-to-earnings ratio can be an indication that the company is undervalued. In my opinion, a general rule is that a stock with a P/E ratio below 15 is considered low. However, this isn’t a hard and fast rule, and does change depending on the industry and other variables.
I need to be careful not to think that a low share price is automatically a good buy. The share price could have fallen for a good reason, and doesn’t necessarily make it undervalued.
Finding the best shares for me to buy personally
The second piece of advice that I’ve found helpful from Warren Buffett is that I should “buy into a company because you want to own it, not because you want the stock to go up”. This relates to finding the best shares because sometimes I can get overly focused on share price performance.
I might see a stock that has risen over the past few months and conclude that it’s the best share for me to allocate money to. But what if I don’t believe the company has a long-term future? Or what if it’s involved in unethical activities? In this case, I don’t want to own it.
The message here is also that the best share for me to buy at the moment won’t necessarily be the same as the best one for someone else. It’s a subjective issue, and so I shouldn’t try and simply make it objective. If I passionately believe in a company and think it will be successful, then for me that’s the one to buy.
These two pieces of advice from Warren Buffett help me to think a bit deeper when stock picking. Given the experience he has, I definitely think it’s worth me following him. It won’t work every time, but with a diversified portfolio, I hope to come out on top.