A lui Warren Buffett investing principle of buying great businesses with a wide economic moat at great valuations is still a sound strategy for average investors, according to Morningstar CEO Kunal Kapoor, despite tempting get-rich-quick trades.
“Yeah, I think it does,” Kapoor told Yahoo Finance (video above) when asked if investing like the “Oracle of Omaha” still worked in today’s high-speed trading world. “History has shown that when a lot of people say it doesn’t work, that is exactly when you want to kind of go back to it.”
Those inclined to follow the Berkshire Hathaway chairman’s deep-value-focused approach tend to pay attention to his favorite measure of stock market valuation: the “Buffett Indicator,” as it’s called by legions of devotees, which takes the Wilshire 5000 Index (viewed as the total stock market value) and divides it by annual U.S. GDP.
The Buffett Indicator rose to fame after the billionaire wrote about it in a 2001 Fortune Magazine article with longtime Fortune writer and Buffett insider Carol Loomis.
„Raportul are anumite limitări în a vă spune ceea ce trebuie să știți”, a explicat Buffett în articol. „Totuși, este probabil cea mai bună măsură a stării evaluărilor la un moment dat.”
Lately, that indicator has been flashing signs that stocks are not yet cheap enough to go all in. It continues to hover around its late 2021 highs, even as 2022 has been dreadful for markets amid rising interest rates and slowing economic growth.
Looking at the numbers, the Buffett Indicator stands at about 149.7%, according to de date from GuruFocus. That’s down sharply from record highs above 202% in August 2021, though still well above the levels seen during the COVID-19 recession in 2020 and economic downturn of 2008-2009.
“The stock market is significantly overvalued according to the Buffett Indicator,” researchers at GuruFocus wrote. “Based on the historical ratio of total market cap over GDP (currently at 149.7%), it is likely to return 2.3% a year from this level of valuation, including dividends.”
Accordingly, Morningstar’s Kapoor thinks staying patient right now is key for investors, as finding good prices to buy a share of a business is important for longer-term returns.
“If you can get those [businesses] at the right price and hold these companies for lengthy periods, your capital tends to compound because they’re great businesses and they do a good job with capital allocation,” Kapoor said. “A buy-and-hold strategy does tend to work pretty well over time.”
Brian Sozzi este un editor general și ancoră la Yahoo Finance. Urmăriți-l pe Sozzi pe Twitter @BrianSozzi și pe LinkedIn.
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Source: https://finance.yahoo.com/news/why-investing-like-warren-buffett-still-works-according-to-morningstars-ceo-132907357.html