Warren Buffett, one of the most respected and legendary investors in the world, is widely known as a “value investor.” However, he is actually a “growth investor.” This is because Buffett does not sell simply based on a high Price-to-Earnings Ratio (PER).
Traditionally, value investors make buy and sell decisions based on valuation metrics such as PER and Price-to-Book Ratio (PBR), aiming to buy at low prices and sell at high prices. In contrast, growth investors focus less on multiples and more on Earnings Per Share (EPS) trends, specifically whether a company can sustain its profit growth over time.
Investing in companies with strong brands and sustainable competitive advantages – Coca-Cola, American Express, and Apple all have high customer loyalty and global market dominance.
Long-term holding strategy – Most of Buffett’s top-performing stocks have been held for decades, maximizing the power of compounding returns.
Preference for companies with strong pricing power – Buffett favors companies like Moody’s and Apple, where raising prices does not significantly impact customer demand.
Adapting to change while maintaining principles – He sold stakes in some banks (Wells Fargo, U.S. Bancorp) but continued to hold Bank of America due to confidence in its CEO.
His core investment strategy reflects that he makes investment decisions based on long-term revenue growth and the key attributes necessary for EPS growth.
Making sell decisions solely based on stock price fluctuations or valuation multiples may not be sufficient for successful investing. The lesson from Buffett’s Sell Smart strategy is that a deep understanding of a company’s core competitive advantages and the ability to recognize fundamental changes are essential for a successful investment journey.
Apple’s Stock Price Trend & Buffett’s Major Sell Decisions
1) Large-scale selling during EPS growth stagnation (First bought in 2016, major selling in early 2024)
2) No position reduction despite high PER (No selling in 2020 and 2021, despite high valuation)
Source: QuantiWise, Forbes, Core16
