Insider Monkey

Warren Buffett and Wall Street Analysts Love These Stocks

Ramish Cheema
8 min read

In This Article:

In this piece, we will take a look at the stocks that Warren Buffett and Wall Street analysts love. If you want to skip our background on Warren Buffett and his investment giant Berkshire Hathaway, then take a look at Warren Buffett and Wall Street Analysts Love These Stocks: Top 5 Stocks.

Warren Buffett is one of the richest people in the world, with his fortunes being a result of careful and prudent investment decisions made on the stock market and in the finance industry. He operates through the investment holding company Berkshire Hathaway which is also one of the most valuable companies in the world. Berkshire's shares trade under two tickers, namely Berkshire Hathaway Inc. (NYSE:BRK-A) and Berkshire Hathaway Inc. (NYSE:BRK-B), and the firm's market capitalization is a whopping $786 billion. This makes Berkshire nearly a trillion dollar company, despite the fact that it does not operate in the lucrative technology industry like today's trillion dollar giants such as Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Alphabet Inc. (NASDAQ:GOOG).

Of course, big tech mega cap giants are several times more valuable than Berkshire; however, Mr. Buffett's firm's status as a beast of its own standing is clear when we compare its $786 market capitalization to the value of the world's biggest bank JPMorgan Chase & Co. (NYSE:JPM). JPMorgan's latest market cap is $445 billion, so despite having trillions of dollars in assets, the bank is considerably less valuable than Berkshire.

So, what makes Warren Buffett so successful? It's a question that a lot of people wonder every day, probably when looking at their rent payments at least. After all, if it was easy to become a billionaire, everyone would become one. As a result, the common belief in the general public is that there really must be an undecipherable secret sauce known only to the famed Oracle of Omaha. Well, the answer isn't that complicated if we're honest. One of the biggest assets that Mr. Buffett has successfully made use of during his multi decade career as an investment manager is not money, but time. Even the richest person in the world (right now it's Elon Musk) cannot use his billions to buy time, and slightly deviating from our subject, Elon Musk is at the top of the global wealth food chain today because he spent his time building companies and solving some of the most difficult problems in the world such as high volume electric vehicle manufacturing and rocket reusability.

For Mr. Buffett, his utilization of time has come through an investment approach called value investing. Value Investing is a well known approach followed by other hedge fund bosses such as Seth Klarman of Baupost Group and Leon Cooperman. It involves carefully evaluating a stock and then determining its fair value. This fair value is then compared to the share price, and if it's lower, then a case is made for a buying decision. This decision is also influenced by a term called the Margin of Safety. This is the difference between the market price and the fair value. The higher this percentage value is, i.e., the greater the difference between the fair value and the trading price, the safer a stock purchase is since it serves to theoretically protect an investment from facing significant losses on the market. For instance, if the fair value of two stocks is determined to be $20, and one is trading for $15 while the going rate for the other is $10, then ceteris paribus, the latter will be a better buy since the chances of it dropping are lower than they are for the stock with the market price of $15.

Terms and Privacy Policy
Your Privacy Choices
Utah Privacy Notice

Recommended Stories