Warren Buffett success in the stock market is incomparable. He has succeeded in the stock market than any other investor. He has an investing philosophy which has enabled him to be successful for over seven decades. Many investors wonder about the trick behind Warren Buffets success in the stock market. Buffett has one indicator which he uses for his investment analysis. The index is the ratio of the country’s stock market to the GDP. When the stock market is below 50% he considers the market too low and risky for trading. The right investment opportunities occur when the stock market is between 75%-90%. When the percentage reaches 115 and above, he considers the market overvalued.
In 2017, the stock market was 130% and above and this is the reason why Warren Buffett and the Berkshire Hathaway did not engage in any meaningful investments. The market was overvalued. As an esteemed investor, his indicator method can be treated as a correct way of market analysis. Buffett is among the wealthiest people in the world. He is known for his solid investing philosophy which has seen him invest in various industries such as insurance, energy, financials and other areas. His firm Berkshire Hathaway Inc. is now in the top five list of the companies with the highest net-worth. This indicator can be used to invest in any country.
Investors can use this indicator to know which countries to place investments. Countries with the right stock values can offer good opportunities for long-term investments. Investors can also use the indicator in the analysis of individual companies. A firm that is paying higher dividends than competitors is a good indication of a company suitable for investment. There are higher chances of the company performing better in future. The Warren Buffett indicator offers excellent opportunities for investors to pick undervalued stocks.