alt Hacker NewsI just asked ChatGPT what Warren Buffett's strategy is, and it said buying undervalued companies and holding for a long time. Is that true? I thought it's not a good idea to buy loser companies.
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> I just asked ChatGPT
Please don’t do this.
> what Warren Buffett's strategy is, and it said buying undervalued companies and holding for a long time
No. It’s cheap leverage applied to low-volatility assets bought for a fair price [1]. (Munger got him off the ‘cigarette butt’ strategy of buying on the cheap.)
[1] https://www.nber.org/system/files/working_papers/w19681/w196...
An undervalued company is one that everyone else thinks is a loser but actually isn't - if you can identify that (and maybe make some adjustments to it) you can make a lot of money pretty quickly.
He calls them "cigar butts." His analogy is that you collect enough of them, and you have a whole cigar.
Undervalued, not underperforming. Companies that others overlook but have solid fundamentals and great strategy.