Customer Service 1 (888) 261-2693
Please enter Search keyword. Advanced Search
Home About Us Resources Archive Free Reports Market Window

A Simple Strategy for When to Buy This Legendary Investor's Stock

By Steve Sjuggerud and Brett Eversole, True Wealth Systems
Monday, March 11, 2013

Warren Buffett is always searching for a bargain. And right now, he sees one in his own stock price...
 
"The surest way to make money is to buy your own dollar bills for $0.80 or $0.90," the legendary investor said last week on CNBC.
 
Berkshire Hathaway – Buffett's holding company – currently trades for 1.35 times book value (a rough measure of liquidation value). At that price, Buffett is interested in buying up his own dollars by buying back Berkshire shares...  
 
We were curious if Buffett's buyback strategy was a real money maker. So we put our True Wealth Systems computers on the case...
 
Finding historical Berkshire Hathaway data can be a problem. But our database is so extensive, we have access to more than 30 years of price and price-to-book-value data on Berkshire.
 
During his interview with CNBC, Buffett said, "We feel the value of Berkshire is well over 120% of book."  
 
That's 1.2 times book value. So we simply tested Buffett's idea of buying Berkshire when it trades for less than 1.2 times book value. Based on history, it's an incredibly profitable idea...
 
You see, since 1981, if you'd simply used a "passive" strategy of buying and holding Berkshire for five years, your average annual gain would be 19% across any five-year period.
 
That is a fantastic buy-and-hold return, of course. But if you waited for Buffett's buy signal... you would've made much more money...
 
By simply buying when Berkshire is below 1.2 times book and holding for five years, your average annual gain increases to 34% a year. That's nearly twice the annual gain. And with compounding, it more than doubled your average five-year return...
 
The same holds true over shorter (three-year) and longer (10-year) holding periods...
 
BRK Returns Across All Periods 
  
Annualized Gain 
Avg Total Return 
3-Year 
20% 
84% 
5-Year 
19% 
183% 
10-Year 
20% 
718% 
  
BRK Returns When Price-to-Book Value Is Less Than 1.2 
  
Annualized Gain 
Avg Total Return 
3-Year 
32% 
137% 
5-Year 
34% 
364% 
10-Year 
30% 
1,309% 
 
Simply following Buffett's advice to buy Berkshire's stock below 1.2 times book – rather than buy and hold – leads to much larger long-term gains. And the effects of compounding make those gains even larger over time.
 
The only problem: You don't get many shots to buy Berkshire at that level. In our study... the opportunity cropped up only seven times in 32 years...
 
Today, Berkshire is above the book value threshold we used, but not by much... As I said, it's trading at 1.35 book value. The stock is not expensive, even at this price.
 
The history is clear, and Buffett is right. Buying shares of Berkshire at a great value is a great long-term strategy. Take advantage of it! 
 
Good investing, 
 
Steve Sjuggerud and Brett Eversole




Further Reading:

See what else Steve's True Wealth Systems computers are finding right now...
 
What Our 47%-a-Year Gold System Says Now
You could have turned $10,000 into over $3 million trading gold... if you'd invested following the principles of the True Wealth Systems gold strategy.
 
Should You Buy at New Lows? Or New Highs? 
This idea can keep you from losing money, and it can allow you to capture bigger gains.

Market Notes


NEW HIGHS OF NOTE LAST WEEK 
 
Thai Fund (TTF)... Thai stocks  
Indonesia Fund (IF)... Indonesian stocks 
iShares Australia (EWA)... Australian stocks  
iShares Japan (EWJ)... Japanese stocks 
iShares U.S. Real Estate Fund (IYR)... real estate stocks  
iShares U.S. Consumer Fund (IYC)... the American consumer lives on  
iShares Transportation Average Fund (IYT)... transportation stocks  
iShares Technology Fund (IGV)... Big Tech stocks 
iShares Dow Jones U.S. Consumer Goods Fund (IYK)... the "basics" 
iShares Dow Jones U.S. Industrial Fund (IYJ)... industrial stocks 
iShares Nasdaq Biotechnology Fund (IBB)... biotech stocks 
Guggenheim Airline Fund (FAA)... airline stocks 
PowerShares Food & Beverage Fund (PBJ)... food and drink stocks  
PowerShares Dynamic Media Fund (PBS)... media and entertainment  
PowerShares Water Resources Fund (PHO)... water stocks  
PowerShares Aerospace & Defense Fund (PPA)... guns, planes, bombs  
PowerShares Buyback Achievers Fund (PKW)... shareholder rewards 
PowerShares Dynamic Pharmaceuticals Fund (PJP)... Big Pharma 
SPDR Utilities Fund (XLU)... utilities stocks 
SPDR International Health Care Fund (IRY)... health care stocks

NEW LOWS OF NOTE LAST WEEK 
 
Market Vectors Gold Miners Fund (GDX)... gold stocks

premium teaser

How to buy Buffett... at a 22% discount to today's price… 
 
There's nothing Buffett likes to do more than buy his own stock for $0.80-$0.90 of what it's worth. You can do that today… 
 

In The Daily Crux



Recent Articles
Legal Notices: Stansberry Research LLC (Stansberry Research) is a publishing company and the indicators, strategies, reports, articles and all other features of our products are provided for informational and educational purposes only and should not be construed as personalized investment advice. Our recommendations and analysis are based on SEC filings, current events, interviews, corporate press releases, and what we've learned as financial journalists. It may contain errors and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility.

 

Readers should be aware that trading stocks and all other financial instruments involves risk. Past performance is no guarantee of future results, and we make no representation that any customer will or is likely to achieve similar results.

 

Our testimonials are the words of real subscribers received in real letters, emails, and other feedback who have not been paid for their testimonials. Testimonials are printed under aliases to protect privacy, and edited for length. Their claims have not been independently verified or audited for accuracy. We do not know how much money was risked, what portion of their total portfolio was allocated, or how long they owned the security. We do not claim that the results experienced by such subscribers are typical and you will likely have different results.

 

Any performance results of our recommendations prepared by Stansberry Research are not based on actual trading of securities but are instead based on a hypothetical trading account. Hypothetical performance results have many inherent limitations. Your actual results may vary.

 

Stansberry Research expressly forbids its writers from having a financial interest in any security they recommend to our subscribers. And all Stansberry Research (and affiliated companies), employees, and agents must wait 24 hours after an initial trade recommendation is published on the Internet, or 72 hours after a direct mail publication is sent, before acting on that recommendation.

 

© 2024 Stansberry Research, LLC. | Privacy Policy| Customer Service
Stansberry Research. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This website may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Stansberry Research, LLC. 1125 N Charles St. Suite 500, Baltimore MD 21202.