Learn to invest with Buffett

Chapter 85

Chapter 14 Section 5 It is not necessary to use forecasting tools

We will not sell some of the shares of those good companies at will because of rumors that the US Federal Reserve may adjust the interest rate, or hear Wall Street analysts’ forecasts on the stock outlook, just like we will not sell more eggs. Hens are sold the same way.

--Warren Buffett
Buffett believes that when choosing stocks to invest in, it is most correct for investors to trade in their own way.Investors don't have to consider macroeconomic factors or use forecasting tools.

Buffett believes that investors don't need to waste time thinking about macroeconomic factors.Buffett once said that even if the chairman of the Federal Reserve tells him the monetary policy for the next few years, he will not change his investment decisions.In Buffett's view, no one can predict the economic situation.Furthermore, if an investor chooses a stock that can only be profitable under a certain economic situation, then this stock means volatility and speculation.Buffett said that a company that truly has a sustainable competitive advantage can be profitable no matter what the economic situation is, and the economic situation affects only the amount of profit.During Buffett's investment career, companies he invested in such as Coca-Cola, Washington Post, and Gillette have all created high profits, even in a very bad economic environment.Buffett believes that the macroeconomic situation has only one role for investors, which is to give investors the opportunity to buy high-quality stocks at low prices when the economy fluctuates greatly.

According to Buffett, investors don't have to use forecasting tools.The forecasting tools appear to be accurate.But the stock market is always changing, and there is no law at all.The more rigorous the stock forecasting tool is, the more ridiculous the stock forecasting tool is.Buffett believes that the stock market is a place where mania and depression alternate.There are days when it's excited about the promise of the future, and at other times it's unreasonably frustrated.Of course, such behavior creates investment opportunities, especially when the stock prices of good companies are unreasonably undervalued by the stock market.But the stock market is not an investment advisor; it exists only to help investors buy or sell stocks.Investors should not consider those forecast results, but should delve into the company's historical operating record.All an investor has to do is analyze the intrinsic value of a stock and then buy those stocks when the stock price enters a margin of safety.The stock market is a voting machine in the short run and a fair balance in the long run.Therefore, once investors choose stocks, they don't have to care about short-term fluctuations in stock prices.As long as you insist on long-term holding, you will be able to get rich returns.There is no stock-quote terminal in Buffett's office, but Buffett still dominates the stock market.Buffett believes that if one intends to hold the stock of a good company for a long time, but wants to use a forecasting tool to predict the daily stock price, it is very unreasonable.

Investment motto:

When choosing stocks, investors should focus on the operating conditions of the company, judge the intrinsic value of the company, and then buy stocks in the area where the stock price falls within the margin of safety, and should not be superstitious about the impact of the macroeconomic situation and the ability of forecasting tools.

(End of this chapter)