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Warren Buffett summed up value investing, the strategy that helped him amass his wealth, in one sentence on Saturday.
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“What gives you opportunities is other people doing stupid things,” the “Oracle of Omaha” told Berkshire Hathawaythe annual meeting of shareholders.
Value investing generally involves buying stocks or companies that are undervalued when others sell them at a discount, and then holding them for the long term. This approach led to some of Buffett’s biggest investments, especially when others panicked.
During the financial crisis of 2008, the mythical investor bought Bank of America, which is still one of his biggest holdings. He also acquired shares of Goldman Sachsbut has since sold its stake in the banking giant.
Buying while others sold in fear partly helped Berkshire return a whopping 3,787,464% from 1965 to the end of last year. This is far more than the 24,708% return of the S&P 500 over this period.
And while Buffett recognizes that the world is changing, he thinks value investing opportunities abound.
“In the 58 years we’ve run Berkshire, I would say there’s been a huge increase in people doing stupid things, and they’re doing big stupid things,” he said. “The reason they’re doing it is that to some extent they can get money from people a lot easier than when we started.”
“I would love to be born today, walk out with not too much money, and hopefully turn it into a lot of money,” Buffett said.
Charlie Munger, vice chairman of Berkshire Hathaway and longtime Buffett’s right-hand man, takes a more pessimistic view of value investing.
“I think value investors are going to have a harder time now that there are so many competing for fewer opportunities,” Munger said. “My advice to value investors is to get used to making less” money.
Despite Munger’s more optimistic outlook for value investing, Buffett believes opportunities will arise for value investors given the short-sightedness of so many in today’s society.
Follow CNBC’s live stream of Berkshire Hathaway’s 2023 Annual Meeting here.