Why Do Some Investors Follow Buffett's Stock Picks?


Quick Answer

Warren Buffet is one of the most successful and respected investors alive, and other investors follow his stock picks in the hopes of following his success, explains Investopedia. Commentators sometimes call Buffet the "Oracle of Omaha," referring to his home state and his investing foresight.

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Full Answer

Warren Buffet generally follows the practice of value investing, states Investopedia. However, he does sometimes break his own rules. His number one investing rule is pragmatism. Buffet often states that the best holding period for a stock is forever, meaning that if a company is not worth owning in 10 years it is not worth owning now, according to Forbes. He reminds investors that buying stock is buying into a company with the expectation of long-term company profit and growth. The goal is to earn a long-term rate of return greater than other options, such as bonds and real estate.

For Warren Buffet, following his own rules means heavily researching potential investments, explains Forbes. Investors follow Buffet's stock selections, as they can be sure the companies are well researched and likely to perform well. However, now that Buffet is incredibly wealthy he can also negotiate a better price and entry point than many investors off the street. Financial news websites routinely report on stock purchases by Buffet's company Berkshire Hathaway, such as a Bloomberg article from 2015 that discusses Berkshire's purchase of stock in Liberty Media, CVS Caremark and General Dynamics.

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