Who says Warren Buffett isn't a rule breaker? Berkshire Hathaway's (NYSE: BRK-A) (NYSE: BRK-B) iconic chairman, widely regarded as the best investor of all time, spent precious little time talking up the virtue of value investing during this month's annual meeting of shareholders in Omaha.
"I would never spend a lot of time valuing declining businesses," Buffett said during a multihour question-and-answer session. "The same amount of energy and intelligence brought to other businesses is just going to work out better."
Sound like anyone else you know? How about Motley Fool co-founder David Gardner? How about the entire Motley Fool Rule Breakers team? We'd much rather pay US$2 for the chance at US$10, US$20, or even US$100 than the dyed-in-the-wool value hound who aims to buy US$1 for US$0.50.
And yet, as portable as Buffett's wisdom may be, I met exactly zero rule breakers during a post-meeting event for Foolish members. Most were connected to Motley Fool Inside Value or Motley Fool Income Investor or Million Dollar Portfolio, whose approaches most often appeal to bargain-hunting Fools. I was, you might say, a rule breaker in Graham and Doddsville.
The intrinsic value of shifting perspectives
So why go to the Berkshire meeting? Why spend time with the value crowd when my stated strategy is to pay a premium for misunderstood multibaggers in the making? Because hanging with others whose perspectives differ from mine has made me a better investor over the course of years.
3 big ideas from Buffett
As is his prerogative, Buffett wasn't in much of a sharing mood when it came to specific stock ideas during the annual meeting. But he also wasn't short on wisdom. Here are three pieces of advice worth heeding:
1. Buy what you know, or can learn. Just as Buffett and Charlie Munger counseled against spending too much time evaluating declining businesses, they also advised sticking with industries and companies you know best. Two that came up during the Q&A: Apple (Nasdaq: AAPL) and Google. "They're both huge companies. They look very tough to dislodge," Buffett said. "I would not be at all surprised to see them worth a lot more money in 10 years."
Will we see Berkshire buy shares of Apple or Google anytime soon? Munger said no, and for exactly the right reason. "The only fair thing we can say is that there are a lot more people who know these companies [better]. We have the reverse of an edge. What do we know about computer science?"
2. Price also matters. While we breakers don't obsess over price in the same way our value-driven peers do, Buffett's advice on buying well rings as timeless: "If you buy businesses for less than they are worth, you're going to make money. If you know which businesses you can and cannot value, you're going to make money."
3. Mr. Market will never stop being crazy. Finally, Buffett debunked the idea that Mr. Market is in any way rational. "The beauty of stocks is they do sell at silly prices sometimes," Buffett said. "That's how Charlie and I got rich." Rich? That's too polite a word for Buffett's Scrooge McDuck-like US$44 billion fortune.
Avoid declining businesses, buy what you know, spend time studying where you have an edge, and never forget that the market offers silly discounts on a regular basis. Wonderful ideas, all, and just as applicable to us rebel investors — principles I'd dare say we live by — as to any other. Maybe that's why Buffett avoids calling himself a "value" investor. He knows, rightly, the term is too limiting.
I've got a better name for him: rule breaker.
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A version of this article, written by Tim Beyers, originally appeared on fool.com
