Now, more than ever, is the time to invest like Warren Buffett

With share prices falling and fear of a recession ahead, our author thinks it’s time to follow Warren Buffett’s advice and be greedy when others are fearful.

Warren Buffett at a Berkshire Hathaway AGM

Image source: The Motley Fool

Key Points

  • Warren Buffett is known for telling investors to be greedy when others are fearful
  • With share prices coming down, I think that there's fear in the market at the moment
  • Prices might be about to fall further, but I think that it's time to be greedy

Warren Buffett is known for telling investors to be greedy when others are fearful. This involves buying shares when everyone thinks that prices are about to go down.

In my view, Buffett’s advice might be more important now than it has been in a long time. With fear in the markets, it’s time for me to be greedy.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

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Fear

I think that investors are fearful at the moment. Both the FTSE 350 and the S&P 500 are significantly lower than they were at the start of the year.

Share prices have been coming down as central banks attempt to bring inflation under control by increasing interest rates. The result has been a decline in stock markets.

At the moment, investors are anxiously monitoring the economic situation. The prospect of more rate increases or even a recession is continuing to weigh on stocks.

As stocks fall, market participants seem to be less and less willing to invest. Their concern is that if they buy shares in a company today, they might find that their investment is down 10%, 15%, or 20% next month.

One of the best examples of this is Netflix. A year ago, the stock was trading at around $497/share and investors were enthusiastically buying shares.

Today, the stock is much cheaper, with the share price under $176. But instead of taking advantage of the discounted valuations, investors seem to be holding off buying in case the stock has further to fall.

This tells me that there’s fear in the stock market. And I intend to follow Buffett’s instruction and be greedy.

Greed

Declines in the stock market have been uneven. Some stocks – such as Halma – have fallen by around 40% since the start of 2022 (Halma’s down about 30% in the last 12 months).

Others, however, have fared better. National Grid, for example, has lost only 3.5% of its share price since the beginning of January.

There’s less fear around National Grid stock than there is around Halma. To find the best opportunities, I’m looking at shares that others are most afraid of.

Being greedy when others are fearful

One of these stocks is Rightmove. I’ve been an admirer of the company’s dominant market position, impressive capital structure, and low capital expenditures for some time. With the stock down around 15% over the last year, I’ve been buying shares for my portfolio.

Another example is Experian. The stock is trading 18% lower than it was 12 months ago. I see this as an opportunity for me to add shares in a business that is well protected from disruptive competitors.

Lastly, I’ve been adding shares in a company whose strong intangible assets impress me. Games Workshop is able to generate impressive cash flows from relatively few tangible assets. I’ve been using recession concerns to buy shares at a 44% discount to the price this time last year.

Each of these stocks has risk associated with it. Stocks haven’t been falling for no reason and a recession might bring down their profits, lowering shareholder returns as a result.

Over time, however, I think that following Buffett’s advice and being greedy when others are fearful will pay off for me. And that means looking for opportunities to make investments while others are concerned about a falling share prices.

Inflation Is Coming: 3 Shares To Try And Hedge Against Rising Prices

Make no mistake… inflation is coming.

Some people are running scared, but there’s one thing we believe we should avoid doing at all costs when inflation hits… and that’s doing nothing.

Money that just sits in the bank can often lose value each and every year. But to savvy savers and investors, where to consider putting their money is the million-dollar question.

That’s why we’ve put together a brand-new special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation…

…because no matter what the economy is doing, a savvy investor will want their money working for them, inflation or not!

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Simply click here, enter your email address, and we’ll send it to you right away.

Stephen Wright has positions in Experian, Games Workshop, and Rightmove. The Motley Fool UK has recommended Experian, Games Workshop, Halma, and Rightmove. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Should you invest the value of your investment may rise or fall and your Capital is at Risk. Before investing your individual circumstances should be considered, so you should consider taking independent financial advice.

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