Warren Buffett is known as one of the most successful investors in the world. One of the reasons why he’s well respected is because of his performance over a long period. Buffett is currently 90 years old, but still has his finger on the pulse of financial markets. Over the decades, he’s provided a lot of advice for investors like myself to pick up on. I want to try and use this when looking for the best UK shares to buy right now.
A contrarian investment approach
Back in 2008, Warren Buffett was quoted as saying that “a simple rule dictates my buying: be fearful when others are greedy, and be greedy when others are fearful”. This can be termed as a contrarian approach to investing. When other investors are greedy and the stock markets are high, Buffett would be fearful.
On the flipside, during times when the stock market is falling (think about when Buffett made the comment in 2008), it can be a time to buy. The thinking here is that stocks may be oversold during fearful times. In this way, the true value of the stock might differ from the share price during a period of high stress.
In this way, a contrarian approach of buying undervalued stocks when others are selling could offer me a profitable long-term investment strategy. Over time, I would expect the share price of the UK share I bought to return to a fair value. In this way, it should generate me a profit.
Finding the best UK shares to buy now
At the moment, I can apply this advice when looking for the best UK shares to buy now.
For example, investors have piled in to popular stocks during lockdown, such as Ocado Group. I’d be cautious about rating this as the best UK share to buy now. I appreciate that concerns around the Indian variant of Covid-19 are high, but I think that we’ve had the last full lockdown in the UK. So instead of being greedy and buying this stock, I think there are better opportunities elsewhere.
At a broader market level, I’d be using the dips we’re seeing in the FTSE 100 to buy. Last week there was a couple of days when investors were fearful and the index sold off. Some of the stocks within the index fell more than I think was fair.
For example, Rightmove shares fell 5% in two days. I wouldn’t be fearful here, and would mark it as one of my best UK shares to buy now. This looks beyond the fear last week, and more towards the outlook for the property sector this year and next year.
I could make mistakes, of course. But overall, I think that trying to be more contrarian in nature and looking past short-term moves should help me to be more profitable with the UK shares I’m thinking of buying.
