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Rupert Hargreaves
Rupert Hargreaves
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What Warren Buffett Learned From Phil Carret's Investment Style

Some thoughts on long-term investing

November 29, 2019 | About:

If you don't know who Phil Carret is, I strongly recommend going out and doing some research on this legendary investor.

Carret invented the Pioneer Fund, one of the first mutual funds in the United States. He was a pioneer of long-term quality investing, buying high-quality stocks and holding them for decades, which helped him achieve some of the best for returns in the mutual fund industry.

A great example of his style of investing was his decision to buy Greif Brothers Corporation, a barrel maker, in the mid-1940s. (Greif Brothers was actually recommended to Carret by a broker called Howard Buffett who he met on a business trip to Omaha).

Carret held the stock until at least 1997, riding the share price from $0.68 to $36.50.

Carret was also a shareholder of Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B), and Warren Buffett (Trades, Portfolio) once called him "one of my heroes."

Carret and Berkshire

Carret regularly attended the conglomerate's annual meetings, and at the 1996 meeting, Buffett singled Carret out for his investing style.

Responding to a shareholder who asked Buffett for his thoughts on the best time to buy high-quality companies, Buffett asked Carret to stand up. Buffett then declared, "Phil has done awfully well by finding businesses he likes, and sticking with them, and not worrying too much about what they do day to day."

Speaking about the process for buying good businesses, the Oracle of Omaha declared that it is best to look for stocks that "you wouldn't feel bad leaving the money in with no orders with your broker and no power of attorney or anything," if you went on a trip for 20 years. You know when you come back from this trip, it is "going to be a terribly strong company," he went on to add.

Buffett then went on to give a more detailed analysis of his recommended investing process:

"It's that approach of buying businesses — I mean, let's just say there was no stock market. And the owner of the best business in whatever your hometown is came to you and said, 'Look it, you know, my brother just died, and he owned 20% of the business. And I want somebody to go in with me to buy that 20%. "And the price looks a little high, maybe, but this is what I think I can get for it. You know, do you want to buy in?' You know, I think, if you like the business, and you like the person that's coming to you, and the price sounds reasonable, and you really know the business, I think, probably, the thing to do is to take it and don't worry about how it's quoted. It won't be quoted tomorrow, or next week, or next month. You know, I think people's investment would be more intelligent, you know, if stocks were quoted about once a year."

Look to the long-term

One of the qualities that have helped Buffett stand out as an investor and achieve the record he has is his ability to look past short-term market uncertainty and concentrate on long-term business potential. Carret had the same view of the market.

It is often difficult to take this stance because investors are constantly bombarded with information.

I believe one of the best strategies to ignore this information overload is research. If you truly know and understand the companies that you own in your portfolio, it is easier to look past short-term market fluctuations and concentrate on their long-term potential.

Like so many parts of investing, there is no shortcut for this research process. It takes time, effort, and patience. But as Buffett and Carret's success shows, the long-term rewards are certainly worth the extra effort required.

Disclosure: The author owns shares in Berkshire Hathaway.

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About the author:

Rupert Hargreaves
Rupert is a committed value investor and regularly writes and invests following the principles set out by Benjamin Graham. He is the editor and co-owner of Hidden Value Stocks, a quarterly investment newsletter aimed at institutional investors.

Rupert holds qualifications from the Chartered Institute for Securities & Investment and the CFA Society of the UK. He covers everything value investing for ValueWalk and other sites on a freelance basis.

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