Is it possible to find promising stocks now? After all, the DAX and Co. are still high. Our domestic leading index is currently struggling with the brand of 12,800 counters, for example. From the previous record high of around 13,800 points, the DAX is still only 1,000 points away.
Ultimately, however, the answer is: yes, it is possible. However, as an investor you will have to pay attention to a few things: For example, a more selective selection. Or a long-term approach. Or still on cheap valuations considering the quality of the stocks.
How is that possible? Well, that has to be answered very individually in individual cases. However, this Warren Buffett tip can help you find promising stocks even now. Let’s take a look at how.
Warren Buffett and his tips!
Admittedly, there are many Warren Buffett tips that you could basically use. However, today we want to pick out one that concerns a dilemma that many investors may have now: namely that of the comparatively high valuations. And the uncertainty as to whether this is an ideal time to buy shares. Warren Buffett once said in this regard and translated by me:
It is better to buy a wonderful company at a fair price than to buy an average company at a cheap price.
A quote that can again be very pioneering for many Foolish investors looking for. One thing should be clear to us: it would be ideal to buy a wonderful company at an affordable price. However, and here too we should be honest: How often do we really get such an opportunity as investors.
However, the quote implies that we as investors should leave the valuations out of the game. Is the DAX trading at 12,800? Yes, but who cares? Not that Warren Buffett, given that quote. He sees primarily strong and wonderful companies that he wants to own. And in case of doubt pays a fair price for this, which nevertheless promises the prospect of returns in the long term.
However, one should not draw the wrong conclusion from this quote: the statements do not imply that one should be willing to pay any price for a share or a company. No, but fair prices combined with particularly strong companies are sufficient to generate solid, market-winning returns in the long term.
Warren Buffett is now following his advice
The remarkable thing, however, is that Warren Buffett now seems to be sticking to his own tip. In the past weeks and months, security has been the greatest asset to the Omaha Oracle. So Buffett stopped Berkshire Hathaway (WKN: A0YJQ2) back until he can assess the effects of the coronavirus.
However, in the past few days the oracle of Omaha has accessed one or the other time. For example, for assets from Dominion Energy. Or also with its second largest participation, the Bank of America.
So Warren Buffett didn’t look at where the market is now. Or whether the S&P 500 has recovered a large part of its share price losses. No, the driver of the legendary investment company has isolated the company or investment opportunities in the foreground. And, with due regard for the opportunities, the company and also the individual valuation decided to buy.
A Warren Buffett tip for you too?
Warren Buffett’s tip with the wonderful companies at attractive prices can therefore help you to keep the right focus. On the one hand, of course, to be selective. After all, not every company can be described as wonderful. And on the other hand, so as not to be blinded by the development of the broad market. Warren Buffett is now even following his own advice. Maybe a good sign, also for you.
The post This Warren Buffett tip can help you find promising stocks now! appeared first on The Motley Fool Germany.
Vincent owns Berkshire Hathaway shares. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares) and recommends the following options: Short September 2020 $ 200 call on Berkshire Hathaway (B shares), Short January 2021 $ 200 put on Berkshire Hathaway (B shares) and Long January 2021 $ 200 call on Berkshire Hathaway (B shares). The Motley Fool recommends Dominion Energy.
Motley Fool Deutschland 2020