Weakness in the job market , shifting expectations of the Federal Reserve’s next move, fears of a hard landing, the risk of sticky inflation and the upcoming presidential election. To Warren Buffett , none of that macroeconomic stuff matters. The “Oracle of Omaha,” who turned 94 years old last week, is a firm believer that successful investing is about finding a wonderful business within one’s circle of competence at an attractive price, and the rest is just noise. “If we find a business that we think we understand and we like the price at which it’s being offered, we buy it,” Buffett said at Berkshire Hathaway’s annual meeting in 2012. “It doesn’t make any difference what the headlines are, it doesn’t make any difference what the Federal Reserve is doing, it doesn’t make any difference what’s going on in Europe. We buy it.” Whether it’s buying a company’s stock or the entire company, the Berkshire chairman and CEO tends to only pull the trigger when he can grasp the intrinsic value of an asset, understand competition in that industry and how it may evolve in the future. “If we’re right about the business, the macro factors aren’t going to make any difference. And if we’re wrong about the business, macro factors are not going to bail us out,” he said. “We look to value, and we don’t look to headlines at all. … Everybody thinks we sit around and talk about macro factors. We don’t have any discussions about macro factors.” Investors face more volatility as passive index funds and quantitative momentum investments have soared in popularity. These vehicles, which track benchmarks or use trend-following models, have put a large portion of buy and sell decisions in the hands of automated machines. Some argue that it has made the market increasingly sensitive to headlines — and prone to sharp price swings. ‘America is not going to go away’ Buffett, who at Columbia University studied under Benjamin Graham , the fabled father of value investing, has ignored negative headlines even during some of the worst periods of American history, from the Cuban Missile Crisis in 1962 to the terrorist attack on 9/11 in 2001 to the great financial crisis of 2008. Instead, he’s known for taking advantage of any turmoil to buy assets that are suddenly on sale. The legendary investor famously penned a New York Times op-ed column in October 2008 when markets came crashing down over the deepening mortgage crisis and the failure of Lehman Brothers. His message: be greedy when others are fearful because “America is not going to go away; stocks are cheap.” “There’s always going to be good and bad news out there. Which gets emphasized the most, depends on the moods of people or newspaper editors or whomever,” he said in 2012.
Original news source Credit: www.cnbc.com
Benjamin Graham, Berkshire Hathaway Inc., Business News, Investment strategy, stock markets, Warren Buffett
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