Buffett doesn't call bottoms. Anything could happen from here.
One of the best stories about Buffett buying stocks is his experience with The Washington Post Co.. As Andy Kilpatrick explained in his book Of Permanent Value:
After Buffett's purchase, the stock fell for the next two years, and Buffett's investment sank from $10 million in 1973 to $8 million in 1974. Post Co. stock did not move solidly ahead of Buffett's purchase price until 1976. Now the stake is worth more than $1 billion.That's incredible when you think about it. Washington Post stock fell 20% and sat there for years after Buffett bought it, and it ended up being one of the best investments Berkshire ever made.
Buffett isn't concerned about timing bottoms ...... I don't think it would bother him one bit if stocks fell considerably from his recent buy prices. The goal is to buy good companies at good prices and hold them for as long as possible.
Too many forget that when analyzing his moves. In October 2008, Buffett wrote an op-ed in The New York Times. "I've been buying American stocks," he wrote. "If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities."
Stocks fell another 33% after the article was published. Some poked fun. Bad timing, they said. "Warren Buffett loses his Midas touch as shares drop," read one headline in early 2009.
But was it a bad move? Three years later, the S&P 500 is up about 30% from the day his op-ed was published. Ten or 20 years from now, the buys are likely to look even more prescient. It all comes down to your time frame.
Ideally, most investors try to follow that philosophy. In reality, few do. It's hard to be against the whole market stampede. I'm on the journey to summon up my courage to do it when the street is bloody. The results are good so far.
See my another post about what I did during Aug - Oct 2011.
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