The Motley Fool

Warren Buffett’s Favourite Book Can Help You During This Market Crash

Image source: Getty Images.

People look up to Warren Buffett because he is a winner. The legendary investor has built a massive following through his years of making billions of dollars. His influence in the investing world is so extensive that his moves during the present COVID-19 pandemic are highly anticipated.

Buffett’s investment record is at stake. The stock portfolio of his conglomerate, Berkshire Hathaway, is vulnerable to the coronavirus-induced market crash as are the holdings of ordinary investors. However, Buffett has been known to thrive even in downturns and still earn reasonable gains.

The intelligent investor

According to Buffett, one of his best buys is a book. Benjamin Graham’s The Intelligent Investor helped him develop his intellectual framework for investing.

Graham, the proponent of value investing, is an influential figure in Buffett’s life. It is from the book that Buffett gleaned a precise and clear prescription for the proper framework. Buffett discovered that you don’t need to have a stratospheric IQ, unusual business insights, or inside information to succeed.

The key to long-term success is providing emotional discipline. He said, “What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework.”

Keeping a low profile

The size and scale of the 2020 market rout are unprecedented — and something Buffett hasn’t seen in his lifetime. He’s been pretty quiet lately, which his followers find uncharacteristic. Moreover, he’s been selling stocks instead of buying aggressively like in previous market crashes.

Buffett is either fearful of the one-two punch (coronavirus pandemic and oil shock) or biding his time. The man is exercising emotional discipline at this time. Berkshire is likely to post a huge net loss due to unrealized losses on its stock holdings.

Abundance of caution

Despite the ravage that COVID-19 inflicted on stock markets, Buffett and his conglomerate are expected to withstand the current global economic shock. Restaurant Brands International (TSX:QSR)(NYSE:QSR) is among his holdings capable of weathering the storm.

Unlike smaller restaurants, big fast-food chains won’t be fighting for life. RBI, the owner of global brands Burger King, Tim Hortons, and Popeyes, is suffering from huge but temporary sales loss. The operations have been limited to takeout and delivery.

Recently, this $20 billion company drew $1 billion from its revolving credit facility to fortify its balance sheet position. RBI CEO Jose Cil describes the move as an abundance of caution. With $2.5 billion cash on hand, RBI can support restaurant owners and employees throughout this challenging time.

Suspension of dividends for a quarter or two is a possibility, as RBI can save around $300 million more. Nevertheless, as one of the world’s largest quick-service restaurant companies, RBI should rebound in the aftermath of the pandemic.

Cautious stance

Warren Buffett usually makes the big moves during market crashes. He has a $128 billion cash hoard at his disposal which he isn’t burning yet. If he isn’t buying, you must be watchful.

Emotional discipline is at play here. Now is not the season to make ill-time investments. You’re safer keeping your emotions in check while market volatility is extremely high.

This Tiny TSX Stock Could Be the Next Shopify

One little-known Canadian IPO has doubled in value in a matter of months, and renowned Canadian stock picker Iain Butler sees a potential millionaire-maker in waiting...
Because he thinks this fast-growing company looks a lot like Shopify, a stock Iain officially recommended 3 years ago - before it skyrocketed by 1,211%!
Iain and his team just published a detailed report on this tiny TSX stock. Find out how you can access the NEXT Shopify today!

Click here to discover how!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool recommends RESTAURANT BRANDS INTERNATIONAL INC 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 June 2020 $205 calls on Berkshire Hathaway (B shares).

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.