After putting money to work in the stock market for over seven decades, Warren Buffett is arguably the world’s greatest investor.
This longevity has enabled incredible compounding to take place. An investment of $100 in Buffett’s holding company, Berkshire Hathaway, in 1965 would now be worth north of $3.5m.
The Oracle of Omaha has repeatedly shared his investing philosophy with the world. For anyone willing to listen, he has essentially laid down a blueprint to help people succeed in the stock market.
Indeed, investor Mohnish Pabrai became a billionaire by meticulously studying and cloning Buffett’s investing formula. “I’m a shameless copycat”, Pabrai once said.
Never too late
The good news is that anyone can start building wealth in the stock market, even those starting out at 40 with no savings.
For example, let’s say I was able to get my finances in order and start investing £800 a month in stocks.
Assuming market average returns of 8%, those regular contributions would compound into an incredible £1,034,669 after 29 years (excluding platform fees).
Greed and fear
A famous Warren Buffett quote is: “Be fearful when others are greedy. Be greedy when others are fearful.”
In essence, he is advising investors to be cautious when the market is rocketing higher, and to be opportunistic when it is crashing.
It is a contrarian way to invest because most people do the opposite. They become greedy at the top of the market and buy, then fearful at the bottom and sell.
Taking action
One way I could use this in practice is by only investing £600 of my money every month. I could put the other £200 into an easy-access savings account.
This way, I’d have some spare capital to deploy when stocks start crashing. Nobody knows when that will happen, but it is certain to take place at some point. History tells us that.
If a crash happens three years after I start investing, then I’d have £7,200 to play with.
Intuitive Surgical
One stock I’d buy in 2024 if there was a market crash is Intuitive Surgical (NASDAQ: ISRG).
This firm makes minimally invasive surgical robots called da Vinci. And it now has an installed base of 8,887 of these surgical systems, as of 31 March.
In Q1, worldwide da Vinci procedures grew approximately 16% year on year while sales rose 11% to $1.9bn.
The company’s latest da Vinci 5 robot has been built to enable the future of AI and machine learning in surgery. With over 10,000 times the computing power of the previous model, the system will evolve over time through software and enhanced capabilities. In other words, it will self-improve.
Intuitive is a wonderful company and the stock is up 113% in five years and 21,050% in 20.
The global trend towards more robot-assisted surgery is well underway. Yet the firm seems to be barely scratching the surface of its long-term opportunity in the huge healthcare markets of China and India.
The problem here is the stock’s premium valuation already reflects this rosy outlook. It is trading at a forward price-to-earnings multiple of 58.
That is too pricey for me to feel safe loading up today. But if Intuitive shares get thrown out with the bathwater during a crash, then I’ll start getting greedy.
