Warren Buffett: How You Need to Be Investing in 2024

Warren Buffett: How You Need to Be Investing in 2024

if you want the ability to build generational wealth and the Financial Freedom to retire early and leave the unending corporate Rat Race you should be listening to Warren Buffett’s most recent investing advice for the better part of the last year legendary investor Warren Buffett has been eerily Silent not saying a single word publicly despite all the craziness that has ensued in the stock market and the economy that is until now Buffett recently published his famous Burkshire hathway annual letter Buffett uses this letter as a platform to share what’s on his mind on a wide range of topics but what really got my attention and what you should be paying attention to is Buffett’s hidden message for how you should be investing in 2024 in this video we’re going to cover Buffet’s advice for investors in 2024 Buffett’s thoughts on how to prepare for a potential stock market crash and how you can protect yourself financially regardless of what is happening in the economy let’s get into it if you ask most value investors they will tell you that reading Buffett’s annual letter is even more valuable than getting an MBA in this year’s letter Buffett provided essentially a checklist of what makes a great inv M the first item on that list is that a business has to have what is referred to in value investing as a moe here’s how Buffett described it our goal at Burkshire is simple we want to own either all or a portion of a business that enjoys good economics that are fundamental and enduring within capitalism some businesses will flourish for a very long time While others will prove to be sink holes it’s harder than you think to predict which will be the winners and which will be the losers and those who tell you that they know the answer are usually either self- delusional or snake oil salesman the most important part of this concept are the words fundamental and enduring you see as Warren Buffett style investors it’s not just about finding businesses that have great profitability in economics right now the money is made in identifying companies that have characteristics that make it so favorable that those economics are likely to persist decades into the future to demonstrate just how difficult of an Endeavor this is let’s use Buffett’s investment in Coca-Cola as an example decades before Buffett invested in Coca-Cola it was a member of the now Infamous nifty50 stocks during the 1960s and70s these stocks were advertised as the most safe stocks out there businesses that were considered undisrupted and going to be around forever the thinking was that any company on this list couldn’t possibly go out of business and thus any stock in this list was automatically a great investment of course this turned out not to be the case of the 50 names on that list 21 of these companies aren’t even publicly traded anymore additionally many of the nifty50 comp companies that are still around are just shells of their former selves investors in these nifty50 stocks suffered as a result demonstrating why Buffett focuses so much on businesses where the favorable economics are both fundamental and enduring before we move on to the second item on Buffett’s list we’ve compiled an extended checklist of Warren Buffett’s investment criteria that you can download for free by clicking the link Down Below in the description the second item on Buffett’s list is that ideally the business will have attractive future growth opportunities here’s how Buffet described it at Burkshire we particularly favor the rare Enterprises that can deploy additional Capital at high returns in the future owning only one of these companies and simply sitting tight can deliver wealth almost beyond measure even HS to such Holdings can GH sometimes live a lifetime of leisure an example to demonstrate this concept would be the business Costco for background Costco is one of the largest retailers in the United States and over the years has developed an almost cult-like following among his cust customer base this was one of only a handful of investments in the personal stock portfolio of Buffett’s late business partner Charlie Munger Charlie was a longtime shareholder in Costco and as you can tell by the stock chart here he was handsomely rewarded a large reason for the Stock’s outperformance was the attractive growth opportunities in front of the business you see Costco started out as a small retailer in the western part of the United States however over time the company expanded opening more stores given the gargantuan size of the United States this was a huge growth Runway importantly the new store’s opening generated very attractive Returns on investment for Costco in essence Costco became a compounding machine using profits from existing stores to open new ones then using those profits from those newly open stores to open even more new locations this created a virtuous cycle and all Charlie had to do was sit on his hands and let the magic of compounding work the point around attractive future growth opportunities is an often overlooked aspect in investing it’s great to find a business that is generating a lot of cash now it’s even better if you can find a business that is generating a lot of cash and has the ability to use this cash to generate even larger amounts of cash well into the future the third item on Buffett’s list is good management here it is in Buffett’s own words we also hope these favored businesses are run by able and trustworthy managers though that is a more difficult judgment to make however and Buffett has had its share of disappointments in 1863 Hugh mccullock the first com controller of the United States sent a letter to all national Banks his instructions included this warning never deal with a rascal under the expectation that you can prevent him from cheating you many Bankers who thought they could manage the Rascal problem have learned the wisdom of Mr mcu’s advice and I have as well people are not that easy to read sincerity and empathy can be easily faked that is as true now as it was in 1986 previously Buffett has said he evaluates a company’s management using two yard sticks the first is how well they run the business in the eyes of Buffett it is important to see how a manager has performed relative to the company’s status and competitive position in its industry after he or she took on the leadership role Buffett said look at what they have accomplished considering what the hand was they would de when they took over the company compared to what was going on in the industry on this point let’s use Buffett’s largest holding apple as an example as of the making of this video Buffett’s holding company Buck hathway owns a whopping nearly $150 billion worth of Apple stock Apple CEO is a Man by the name of Tim Cook cook became CEO of Apple in 2011 in the company’s fiscal year 2011 Apple did $108 billion in revenue and $26 billion in profit in 2023 that had grown to $383 billion in revenue and $97 billion in profit quite impressive growth additionally Apple has continued to widen its mode by introducing new versions of its smartphone and laptops as well as introducing entirely new products such as airpods and the Apple watch and as if that wasn’t enough enough Apple has grown its high margin service revenue from under 4% of total company revenues in 2023 to almost 25% of revenues in the most recent quarter Tim Cook and apple is just one example but demonstrates the type of things you want to be looking for when evaluating the performance of a company’s management team the second yard stick Buffett uses to evaluate management is seeing how they have allocated Capital over time here’s what that means you see most publicly traded companies that Buffett would invest in are at the point where they are highly profitable over time these cash profits build up in a company’s bank account eventually the company has to decide what to do with all its cash that’s sitting there in the company’s balance sheet this topic of capital allocation is extremely important in determining the ultimate success of an investment Buffett says it’s important that management is allocating capital in a way that is in the best interest of shareholders not in a way that enriches management often times Executives at companies will allocate capital in a way that lines their own Pockets at the expense of shareholders this can include things such as overpaying for large Acquisitions that grow the company the CEO can now say that since he is managing a larger company he deserves a hefty pay raise or it could take the form of repurchasing shares at inflated prices so management can hit it earnings per share Target and get even larger bonuses to recap this video so far Buffett recommends investors look for companies with three things one a fundamental and enduring competitive Advantage AKA and mo think Coca-Cola and the durability of its brand second is a company with attractive future growth opportunities here remember Costco in its early days with an entire country worth of new locations to open into and generate attractive returns third is good management Buffett evaluates a company’s management based on its track record of accomplishments and its ability to allocate capital in the best interest of the long-term shareholders think of Tim Cook and his accomplishments as a CEO of Apple so now that you understand these Concepts there is one more thing from Buffett’s letter that investors need need to know about in 2024 if you don’t understand this one concept it could result in bankruptcy and financial ruin what I’m referring to is the concept of having the so-called Fortress balance sheet Buffett has built Burkshire to withstand any economic or financial crisis there are huge lessons here for us as individuals to apply to our own Financial lives here’s Buffett in his own words I believe Burkshire can handle financial disasters of a magnitude Beyond any here to4 experience this ability is one we will not relinquish our goal is realistic bur’s strength comes from its nigara of diverse earnings we also operate with minimal requirements for cash even if the country encounters a prolonged period of global economic weakness fear and near paralysis your company also holds a cash and US treasury bill position far in excess of what conventional wisdom deems necessary Burkshire is built to last you may be asking yourself how these comments from Buffett apply to individual investors in the year of 2024 Believe It or Not There are incredible important lessons that you can take away from these comments from buffet and apply to your own personal financial situation here’s what I mean take the quote bursha strength comes from its nigara of diverse earnings bur’s Financial Security comes in large part due to its wide ranging earning streams B has a massive stock portfolio an insurance company a railroad an energy company an ice cream restaurant chain and even a Furniture retailer the list goes on and on and you can apply the same lesson to your own Financial life generate income from a job income from Investments and who knows maybe even build up a business venture on the side the options are up to you but these Diversified income streams can give you protection during difficult Economic Times we also operate with minimal requirements for cash for a business it starts to get into trouble when it’s not generating enough cash to cover its Financial Obligations every month or quarter the same logic applies to personal finance by minimizing your monthly Financial Obligations such as your mortgage payment your rent or your car payment you giving yourself Financial flexibility in the event you hit a rough patch financially Burkshire holds a cash position far in excess of what conventional wisdom deems necessary Burkshire is built to last at the end of 2023 burshire had over $160 billion in cash cash equivalents and short-term investments in US treasury bills think of this as berkshire’s emergency fund money that acts as almost an insurance policy if the business becomes temporarily unprofitable the same logic can apply to your personal finances carrying a large cash balance can help you avoid having to liquidate your Investments at cheap prices in the event that there is an economic slowdown imagine a big recession hits and God forbid you lose your job you don’t want to be caught having to sell your stocks at super low prices to cover your living expenses while you find a new job it’s advisable to have up to 6 months worth of living expenses in your emergency fund following these principles laid out by Warren Buffett can help you build your own Fortress balance sheet if you enjoy this video it is obvious that you are interested in learning more about investing and Financial Freedom with that being the case make sure to also check out this other video from our Channel because it will help you on your wealth building Journey 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In this video, Warren Buffett shares his investment advice for 2024. Learn from the Oracle of Omaha himself on how to invest wisely in the upcoming year! This video covers topics such as Warren Buffett’s investment strategy for 2024, Buffett’s stock portfolio, how to invest in the stock market, and much more!