Warren Buffett‘s net worth has surpassed $130bn. He’s among the richest individuals in the world. However, this doesn’t stop Buffett from sharing his advice with regular investors like me and you.
The so-called ‘Oracle of Omaha’ regularly shares his wisdom in his letters to shareholders. He doesn’t tell us “buy x stock” but gives us advice on how we can apply his formula for financial success.
Starting with nothing
Why should we invest instead of save? Well, here’s Buffett’s answer: “Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value.”
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So if we’re taking Buffett’s advice, the first step, even when we don’t have any starting capital, is to open an investing account. We can normally do this with just a direct debit, or commitment to invest some of our earnings.
And if we’re investing with relatively small amounts of capital, say £200 a month, we should consider looking for a brokerage with relative low transaction fees. I use Hargreaves Lansdown for its customer service, but I appreciate there are brokerages with much lower transaction fees.
Investing wisely
Buffett is the king of investing wisely. He doesn’t make impulse decisions, he’s makes calculated investments based on the information and metrics available to him. That’s something we can all do.
There are hundreds of quotes attributed to him, but lots of them reiterate his belief in investing in quality companies for the long run, and finding a good entry point.
“If you aren’t thinking about owning a stock for 10 years, don’t even think about owning it for 10 minutes“.
And of course, the other side of this is that if I invest poorly, I will likely lose money. Some of us learn the hard way, but newcomers can take the advice.
Finding value
“Price is what you pay. Value is what you get.” This is another Buffett quote that tells us not to focus on short-term swings in price, but to focus on the underlying value of our investment.
Of course, we can all have our own interpretations on Buffett’s advice. I actually don’t invest in any of the stocks held by Berkshire Hathaway. But that reflects our own investment timelines, currencies, and other intricacies.
For me, AppLovin (NASDAQ:APP) is a great value investment. One way I look to find value is by using the price-to-earnings-to-growth (PEG) metric. It’s an earnings metric that’s adjusted for the growth analysts expect a company to deliver over the medium term.
The US-listed firm helps app and platform operators maximise advertising revenues through the use of its proprietary technology and focus on the mobile app ecosystem.
AppLovin currently trades with a PEG ratio of just 0.62. A one normally symbolises fair value, we can deduce that AppLovin growth trajectory appears to be undervalued by the market.
While the company does carry a fair amount of debt, and growth has been unstable in recent years, I think this stock is primed to outperformed going forward.
