The FTSE 100 was so busy on Monday that trading platforms struggled to keep up. As investors rushed back to shares after the latest Covid-19 vaccine news, Hargreaves Lansdown reported their busiest day ever. The day ended with the FTSE 100 up 4.7%, and many top stocks did remarkably better. On dramatic days like this, I picture Warren Buffett shaking his head, and I wonder what he’d do.
A sensible person once told me there’s no point trying to be another Buffett. We just can’t hope to develop his insight and expertise. I agree. If I wanted to emulate him, I’d simply buy Berkshire Hathaway stock and leave it at that.
As in every field, we can’t hope to be as good as the best. But we sure can learn from them. And following Warren Buffett’s principles has helped me a great deal with my investing. So what might that teach me about buying shares today? I think the first thing he’d suggest is to relax, sit back, and take stock of things.
Markets seem more settled Tuesday. As I write, the FTSE 100 is up just a few points, a lot more boring than Monday’s excitement. Boring is good. So, with the closest I have to a Warren Buffett head on, what will I do now?
My Warren Buffett head
Let’s think back to the early days of the stock market crash. Back then, I think the key phrase was “don’t panic!” When a stock held suffers from some calamity or other, it’s time to re-evaluate. Is the company materially affected by whatever has gone wrong? Is its business directly harmed? Or is it just caught in the wider downturn?
Companies like Rolls-Royce, and airlines including International Consolidated Airlines, were among those whose businesses looked like they’d taken a potentially long-term hit. Warren Buffett had already turned away from airlines, and I’ve always shunned them.
Then there are companies caught in the crash, but whose businesses are only indirectly hit. Among those, I rank the big banks like Lloyds and Barclays. And I include housebuilders like Taylor Wimpey. Whatever happens, we’ll still need financial services and somewhere to live. Very few people actually need to fly.
It’s all a matter of time
So, yes, things have changed for the better with this vaccine news. But I’ve never doubted they would, sooner or later. It was surely only a matter of timescale. And for those investing for the long term, the short timescales of the next couple of years shouldn’t matter much, should they? They certainly don’t to Warren Buffett.
I’m planning to buy shares whose long-term prospects haven’t fundamentally been changed by this week’s news — just maybe brought forward a little. And though the FTSE 100 has recovered a few percent, I think there are still big stock market crash bargains to be had. I’m looking at companies I think will provide strong gains over the next decade. I’m thinking of Warren Buffett’s suggestion to only buy shares if you’d be happy for the stock market to close tomorrow and not reopen for 10 years.
That approach would surely have rewarded us before the pandemic, and during the pandemic. And I expect it will do so long after the pandemic is over too.
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Alan Oscroft owns shares of Lloyds Banking Group. The Motley Fool UK owns shares of and has recommended Berkshire Hathaway (B shares). The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, and Lloyds Banking Group and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short December 2020 $210 calls on Berkshire Hathaway (B shares). Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020