Feeling a bit uninspired by the stock market recently? When looking for investment inspiration, I often turn to Warren Buffett. His wisdom has helped many early investors get started on the road to generational wealth.
These quotes are among my favourites from the Oracle of Omaha’
Emotional control
“Be fearful when others are greedy, and greedy when others are fearful.”
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It’s difficult to ignore emotions when it comes to money. However, here Buffett highlights the importance of using logic over fear or greed. Since markets tend to alter course in the near future, acting in contrast to the current trajectory can be beneficial.
This advice is similar to another famous quote by Nathan Rothschild: “The time to buy is when there’s blood in the streets.”
Buffett made a fortune investing in the Washington Post during the ’73-’74 bear market, while those around him panic-sold. Always have some spare cash on hand to capitalise on these opportunities.
Price vs value
“Price is what you pay. Value is what you get.”
This quote highlights the importance of differentiating between value and price. Making an investment based purely on whether the price is high or low can mean getting stuck in a value trap.
It’s critical to always assess a company’s intrinsic value before making a decision to buy or not.
Time in the market
“Our favourite holding period is forever.”
This quote not only reiterates a long-term investment strategy but also the importance of picking stocks that are likely to do well forever.
It’s further cemented by the quote: “Time in the market beats timing the market”. Harness the power of compounding returns by holding shares in high-quality businesses for as long as possible.
Putting them to work
When hunting for stocks, I always aim to apply these concepts to my decision process.
One stock I recently bought based on these principles was the FTSE 100 telecoms giant Airtel Africa (LSE: AAF). It’s a high-quality company in an industry that’s likely to do well for decades to come.
Yet despite rising revenue, its earnings have been in decline for several years, leading to unprofitability. Subsequently, the stock price has fallen 35% from its July 2022 high of £1.64.
As a result, it now holds a lot of debt, with a debt-to-equity ratio of 102%.
But I think the company still has strong intrinsic value. It provides internet and mobile services to 14 African nations, mainly in rapidly growing regions like Kenya and Nigeria.
That’s good for long-term revenue but also brings about its own set of challenges. In Nigeria, the falling value of the Naira currency has eaten into Airtel’s profits recently. Political instability across several regions is another risk it must navigate.
But with lots of experience on the continent and limited competition, it stands to benefit greatly — if it can overcome these challenges. Earnings are forecast to grow at a rate of 46% a year going forward, so it’s likely to become profitable again next year.
In addition to its growth prospects, it has a promising dividend yield of 4.5%. The consistency of payments is yet to be proven but if they continue increasing, it could become a decent passive income earner.
It’s certainly one worth considering and I’d buy more of the shares today if I had the cash.
