Warren Buffett has been leading Berkshire Hathaway down a very successful path since he took over in 1965. The conglomerate is worth about $200 billion dollars, and class A shares are creeping up on $250,000 a piece. Obviously there is a lot of strategy that goes into generating these types of profits, and lucky for us Mr. Buffett is usually happy to share some insight.
We already know that there are certain businesses that Buffett automatically avoids; anything that isn’t priced fairly or where he doesn’t think the board can handle things are big “no”s. But once he takes on a business, what would make him sell?
When asked a question similar to that during a lecture at the University of Florida’s Business School, Buffett’s answer doesn’t come as much of a surprise for those familiar with his investment strategies.
“The way to look at a business is, is this going to keep producing more and more money over time? And if that answer is yes, you don’t need to ask any more questions.”
When Buffett looks for investments to make, he is not looking for something that he can sell in 10 years to put some money in his pocket. Rather, he focuses on the long term. Most “long term owners” automatically analyze the businesses they’re investing in with a lot more detail, and the increased thought can easily help generate a higher return— though it might take a little longer.
“I don’t buy Coke with the idea it will be out of gas in 10 years or 50 years… So what we really want to do is buy businesses that we would be happy to own forever.”
Investors thinking long term can easily pay fewer in capital gain taxes and avoid big commission payouts. Instead, do your research and invest in a business that you are sure will be able to withstand any short-term waves, and you’ll be able to reap the long term earnings and dividends.