In his many years of investing, Warren Buffett has amassed a net worth comfortably into the billions.
During his time as CEO of Berkshire Hathaway, the Oracle of Omaha has produced mouth-watering returns – double that of the S&P 500.
Along the way, Buffett has dropped nuggets of advice that I believe all investors should seriously consider when stock picking. Here are three pieces I’d use for my portfolio.
Buy the business
A lot of people judge their decisions based on the share price of a company. However, Buffett has stated in the past that it’s more important to focus on the strength of the business itself.
What this means is that he doesn’t necessarily buy stocks solely because they have a low valuation, for example. Instead, he looks more widely at whether he deems a stock attractive due to its core business features.
If this is the case, Buffett can then assess whether the share price offers value. This again doesn’t mean it’s just ‘cheap’ – but that he sees potential for growth.
Long-term outlook
As well as this, he also buys stocks for the long run. As he once said: “if you don’t feel comfortable owning a stock for 10 years, you shouldn’t own it for 10 minutes.”
Investments will undoubtedly go through volatile periods. But with a long-term perspective, these short-term headwinds are almost irrelevant.
Be greedy
Finally, Buffett has also talked of the ability to “be greedy when others are fearful” as a powerful tool to maximise returns.
The declines we’ve seen in global markets this year are obviously an issue. However, with Buffett’s advice, these declines also become an opportunity.
With many attractive businesses taking hits, now could be the perfect time for me to pile in.
These in action
With these in mind, it makes sense why Apple (NASDAQ: AAPL) is Berkshire’s top holding. The majority of people could tell you the value of Apple’s products and services, showing the strength of the business. And with the stock down 4% in 2022, this may be an opportunity to grab some shares.
On top of this, while past performance is no indication of future returns, the last five years have seen Apple stock rising 343%. For its long-term investors, these are some hefty returns.
Buffett deems Apple as one of his ‘four giants’. And in the second quarter, Berkshire topped up its holdings with an additional 4 billion shares.
The tech giant also posted some strong results in its latest update to shareholders, where net sales jumped 2% compared to H1 2021.
Within the results, CEO Tim Cook talked of Apple’s ability to “enrich the lives” of customers.
The business may see a slowdown in demand in the upcoming months as the cost of living continues to rise. Higher costs for materials and supply chain issues may also prove headwinds for the firm.
However, like Buffett, I deem Apple a strong addition to my portfolio. Its core business features are more than attractive. And if it carries on with its impressive growth, I think I could see some healthy long-term returns.