Warren Buffett is one of my investing role models. Here are some of his lessons that have helped me shape my portfolio.
Buy and hold for the long term
“If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”
Buffett is advocating buying and holding stocks for the long term. He also says, “Our favourite holding period is forever.”
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I am an avid believer in long-term investing and keeping hold of stocks. Furthermore, Buffett says that stocks should be assessed by their strengths and weaknesses. Most importantly, I should be looking for long-term advantages a company possesses within its industry.
With these lessons in mind, I purchased Auto Trader (LSE: AUTO) shares for my holdings and plan to hold them for many years to come. From a bullish perspective, the digital automotive marketplace business is a burgeoning one but Auto Trader has a huge market share here. In fact, one of its biggest risks is a rise in competitors that are attempting to loosen its stranglehold.
Next, Auto Trader has shown excellent adaptability in the face of the digital revolution. It started as a weekly magazine but quickly changed to a website, and now an app too. The company saw the need to move with the times and executed this seamlessly to continue dominating the market and consistently performing well.
Moving on, Auto Trader currently provides me with a passive income through dividends too. It currently possesses a dividend yield of just under 2%. However, dividends can be cancelled at any time at the discretion of the business to conserve cash.
Use your expertise and do your research
“Never invest in a business you cannot understand.”
I believe that Warren Buffett is saying that people can lose money when they invest in a stock or asset that they don’t understand. That doesn’t necessarily mean you need to be an industry expert in order to invest.
He also goes on to say, “Risk comes from not knowing what you are doing.”
A bit of research and homework can alleviate the risk. I’m a big advocate of this, too, and profess to researching a company thoroughly for hours, days, and even weeks sometimes before I make a decision to invest.
With a background in finance and tech, and remembering what Buffett says, I decided to purchase Sage (LSE: SGE) shares some time back after extensive research.
Sage is an accounting and payroll software business. I’m bullish on the stock for a few reasons. To start with, the company commands a huge market share in its respective space.
Next, I’m buoyed by Sage’s consistent good performance and its excellent dividend record. Its current yield stands at 2.5%. From a bearish perspective, at present, the shares look a tad expensive currently so if I were to buy additional shares now, I could be overpaying for them.
Warren Buffett advocates holding stocks for the long term. This is definitely the case for me when it comes to Sage. I’m excited by its future prospects as it looks to capitalise on the artificial intelligence (AI) boom and continue enhancing it within its products. It could enhance its current products further — in turn, boosting performance and returns for years to come.
