‘Mrs. B - Rose Blumkin - had her 100th birthday on December 3, 1993. The candles cost more than the cake.’  

Those were words penned by the Oracle of Omaha in the annual letter to shareholders published in the year 1994, while referring to the founder/manager of one of the Berkshire Hathaway investee companies.

Today, 30 years down the line, Buffett’s friends/family and fans (of whom there are millions) too will be cheering the fact that he is celebrating a birthday where, as he turns 94, the candles will cost more than the cake!

And almost as an advance birthday gift, day before yesterday, Berkshire Hathaway became the first non-tech US company to cross a market capitalisation of a trillion dollars (seventh US company to reach the landmark after Apple, Microsoft, Alphabet, Amazon, Nvidia and Meta Platforms).

Buffett personally may not care for such share-price related milestones, given his firm focus on intrinsic value and not market-assigned value. Nevertheless, crossing that milestone is a validation of how his simple yet profound principles, followed consistently without exception over decades, have generated enormous wealth for his shareholders.

Not many will be aware that 98 per cent of Warren Buffett’s wealth was made in the last 30 years. Pointing this out author Morgan Housel once remarked that ‘if Buffett retired at age 65, you would never have heard of him.’  

During this last 30 years, Bershire Hathaway shares are up 45 times while total return (including dividends re-invested) of S&P 500 is up 21 times.

A remarkable outperformance in the golden years of one’s life. Further, another remarkable feat of Warren Buffett is that he has never made a mistake that pushed back Berkshire Hathaway even for a few years. Most of his errors can be classified as errors of omission (missed opportunity and hence not a loss or hit to finances), and the rest can be seen as rounding of errors with no significant hit (in instances of errors of commission).

For comparison as an example, take the case of Bill Ackman —  another remarkably successful investor in his own right, whose single high-sized bet on Valeant Pharmaceuticals went awry and resulted in massive losses that took around four years for his firm, Pershing Square, to recover from.

This was apart from the reputational hit, which too took a while to recover from. So, Warren Buffett’s track record in sailing smoothly across market cycles without much of a setback is what places him a cut above other legendary investors.

As a celebration of his life, on his birthday here are five enduring lessons, picked from the last five decades of his interviews and annual letters.

 It’s the temperamental quality, not an intellectual quality. You don’t need tonnes tonsof IQ in this business.’

Being a successful investor does not require marquee qualifications and ability to solve complex puzzles. Anyone has a good chance to be successful at it, provided they can control their emotions.

Here are some traits that reflect good EQ — investing only in what you know and can understand, resisting impulsive buying; willing to let go of an interesting opportunity that does not convince you; not being swayed by daily/weekly/monthly stock price movements; sticking to core investment principles and not deviating under any circumstances.

So to be a successful investor, it is important to build our emotional quotient.   

Pascal’s observation seems apt: “It has struck me that all men’s misfortunes spring from the single cause that they are unable to stay quietly in one room”

Berkshire Hathaway’s cash pile is a little above 25 per cent of its total assets today. While many are rushing to invest, Buffett for now is comfortable doing nothing with that money and earning nominal interest on that. He is choosing to be quiet while many money managers around him are caught up in the AI frenzy.

Is he right now? We don’t know, but history is on his side. His cash pile as percentage of assets was trending up/relatively high in the run-up to the dotcom boom, and also during the build-up to the sub-prime crisis. Both times he had a lot of cash to buy stocks at substantial discounts to their intrinsic value after the market bubble burst.

The more important takeaway here is not the possibility of a crash, but that if you don’t find anything attractive, stay in cash rather than investing just for the sake of it. For how long? As long as  it takes for you to find an attractive investment.      

We do not have, never have had, and never will have an opinion about where the stock market, interest rates, or business activity will be a year from now

Tom, Dick and Harry and all have views on where markets will be in a year from now, when stocks will correct, and which dips to be bought. Switch on your TV or log into social media, index and stock price prediction purportedly based on fundamental analysis for the next six months, year and year-end galore.

But think of it, Buffett has made all his wealth without falling for such prophesying. The message — long-term fundamental investors are better off focussing on analysing the gap between intrinsic value and market value., and not in engaging in speculating what the prices will be next year.   

 We rarely use much debt and, when we do, we attempt to structure it on a long-term fixed rate basis.  We will reject interesting opportunities rather than over-leverage our balance sheet.

Tempted to go all in on a convincing buy and put in not just all your resources, but even more by borrowing? Take a pause and comtemplate why one of the world’s greatest investors is not comfortable doing that.

This wisdom of his is especially very pertinent in today’s context in India where many investors have gone big on leverage by not just borrowing to buy shares, but borrowing to even trade in F&O!

If you want to make it big in investing, play the slow and steady game.

What we do know, however, is that occasional outbreaks of those two super-contagious diseases, fear and greed, will forever occur in the investment community.  The timing of these epidemics will be unpredictable.  And the market aberrations produced by them will be equally unpredictable, both as to duration and degree.  Therefore, we never try to anticipate the arrival or departure of either disease.  Our goal is more modest: we simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.

Missed much of the rally in any stock or index in recent times? Tempted to buy even the smallest of dips? This quote from Buffett should provide some succour and help you to build your patience.

Investing quotes apart, Warren Buffett has shared a lot of wisdom on living a happier life, which in turn helps to make better investment decisions. For example, many years back, he shared one of the best pieces of advice he had received from a friend when he was much younger –‘Warren, you can always tell someone to go to hell tomorrow’.

This quote stresses on the need to not let emotions impact our behaviours. As mentioned above, emotional intelligence is a crucial factor for successful investing, and part of it involves responding after processing all information and not reacting to sound bites.

Lots more to learn from the legend, but we’ll reserve some quotes to celebrate his 95th birthday next year.

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