Timely Business Buying Advice from Warren Buffett

I suspect that over the next 24 months there will be a variety of news articles about investors who have made a killing in the stock market, who made many astute buys in early 2009 at the bottom of the market. In hind sight, many people will kick themselves for having missed such a great buying opportunity, and will wish they had bought at the bottom of the market. Yet, why didn’t they? Primarily because of fear. Fear that the market would decline further. Fear that the business whose securities they were buying would run into further financial difficulties and face irreparable harm. Fear of their own financial security if their primary source of income was a job or small business.

Now that the equities markets are approaching pre-recession levels many investors will start buying more stocks, but they will likely have only mediocre performance because they missed buying near the bottom of the market.

The reverse approach is what successful investors do. Warren Buffett provides this advice: “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”

OK, so you may have missed out on one of the best bargain opportunities in decades to buy publicly traded equities, but you may not be too late on buying a small company.

Many of the small businesses that have been negatively impacted by the recession, are only very recently starting to show financial improvement. Yet, many buyers are continuing to show fear about buying businesses unless they made it through the recession relatively unscathed. However, what’s wrong with considering buying a solid business that had a very strong history, then had some financial struggles during ’08 and ’09, but has returned to pre-recession financial performance for the past 3-4 months? There still may be a good opportunity to buy for those who can be “greedy” and put aside their fear. Spend a little more time and energy in understanding the full story about why there had been a financial decline, and what has been done to turn things around before dismissing a business that has had diminished financial performance during the recession. We are at the very early stage of an economic recovery. Those who are aggressive but careful may do very well by acquiring businesses that are still recovering.