When you listen to Warren Buffett speak, you can always take away a few words of wisdom.
It’s nearly impossible not to.
With a fortune of $83.5 billion, and a company that’s generated a 20.9% annual return, as compared to the S&P 500’s 9.9% return between 1965 and 2017, he’s worth listening to.
It’s why over this past weekend, 42,000 investors descended upon Omaha, Nebraska for Berkshire Hathaway’s annual meeting, otherwise known as the Woodstock of Capitalism, where one of Buffett’s key messages was to stay the course with investing.
One of the key one pieces of advice was to stay the course with long-term investing.
In fact, he noted that if he had held a stock he bought in 1942, it would have quadrupled his money. After watching the price of Cities Service preferred stock drop from $84 to less than $40 in 1942, he bought just three shares of the stock at the time.
“We were in trouble, big trouble in the Pacific,” he said.
And as others ran from stocks out of fear, Buffett was instead using that fear as an opportunity, choosing to get greedy with Cities Service, as others became fearful.
Unfortunately, he would sell the stock months later with just a $5.25 gain on the stock.
Had he held that stock, it would have quadrupled his money as it ran to $200 a share.
Lesson learned – the best way to make money is to stay the course.
To this day, Buffett also still believes in getting greedy when others are fearful, and fearful when others are too greedy. Look at Wells Fargo, Geico, and American Express, for example.
For example, Buffett just noted that he believes that Wells Fargo is cleaning up its act after being mired in scandal over the last year. Buffett said Wells Fargo clearly had the wrong incentives in place and didn't act quickly enough when bank employees opened as many as two million accounts without getting customers' permission to meet sales targets.
Still, Buffett defended Wells Fargo as an investment.
"Some of our greatest opportunities came from similar situations," he said. In fact, investments in American Express and Geico came after scandals.
Again, the idea of becoming greedy as others become fearful is clearly an attraction.