For investors like Warren Buffett, investments are best picked with a value investing strategy that focuses on blue chip stocks that can be held for long periods

Successful investors have learned to see the stock market as a natural home for their savings. They agree with renowned investor Warren Buffett, widely recognized as the most successful investor in history. Buffett has often said that the ideal holding period for stock investors is ‘forever’. Buffett never sells because of the possibility of a temporary downturn. He only sells when something goes wrong with one of his investments.

Here’s more on how to identify Warren Buffet investments:

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Value investing and Warren Buffett investments

Buffett’s first great investing achievement was to sell all his holdings in 1969, just prior to the early 1970s market downturn. He felt that 1969 stock prices were simply too high, from a value investing point of view. He re-entered the stock market in 1974, after prices had collapsed by 40% or more. This alone established his investing-legend status.

Since then, the main contributor to his success is his history of excellent stock-picking, and his practice of holding his top picks for a long, long time.

One thing you won’t find in the making of Buffett’s stock-market fortune is a history of relying on any single investment theme or gimmick.

Virtually all successful investors have some understanding of value investing, many have some knowledge of technical analysis, and most have some knowledge of a variety of other tools and shortcuts. But virtually all successful investors take a broad view, and apply everything they know to their investing decisions.

As the saying goes, if you’re going to play the game, you might as well look at all your cards.

Value investing is an investment approach that follows the basic model set by the pioneers of conservative investing, Benjamin Graham and David Dodd.

At the core of the value investing approach is the ability to identify well-financed companies that are well-established in their businesses and have a history of earnings and dividends. They are likely to survive any economic setback that comes along, and thrive anew when prosperity returns, as it inevitably does. At the same time, they are cheap in relation to these measures. Value investors typically have long-term mindsets when it comes to investing.

Another key point about value investing is you shouldn’t sell high-quality stocks just because their prices have dropped. Nor should you sell them just because they’ve gone out of investor favour. Well-established, but out-of-favour stocks, can provide great opportunities for patient investors.

Successful Warren Buffett investments don’t come from market timing

Investors who succeed over decades—the Warren Buffett’s of the investment world—rarely, if ever, talk about spotting market tops and bottoms. They are far more likely to talk about successful investments than wondering when they should sell their blue chip shares. Most have come to see, often after a period of costly stock-trading errors, that you make most of your stock-market profits through stock selection rather than stock market predictions.

In a strategy focusing on long-term gains, avoid selling your best stocks too soon

It’s all too easy to sell a stock that looks like it’s headed for a downturn, only to buy another that is headed for a collapse. For that matter, if you make a habit of selling whenever you feel the market’s risk has gone up, you will wind up selling your best stocks way too early.

You can always find a rationale for selling. Market commentators are continually thinking up new ones, based on recent market strength or weakness, historical market patterns, political or economic predictions, changes in tax policies—the list is endless. This is a good thing. After all, you can only buy a stock if somebody who owns it wants to sell.

Before you act on a selling rationale, take a broader look. Consider facts about the stock, and about your investment goals and temperament. If the selling rationale makes sense and you find additional good reasons to sell, then selling may be the right thing to do. But it’s always a bad idea to sell a good stock for trivial or transitory reasons.

Utilizing a value investing strategy like Warren Buffett: Investments need to be broad

When they choose stocks, many investors try to cut their workload by taking a narrow view. Rather than look at a wide range of information, they prefer to zero in on one or at best a handful of indicators. This can do more harm than good.

For example: focusing on low-p/e stocks. Many disasters-in-waiting go through a low-p/e period prior to their eventual collapse. However, many investing newcomers get the idea that you should only buy stocks that trade at a below-average p/e ratio.

Low p/e problems can be due to a weakness in the business model, rising competition, doubts about the quality of the company’s management or insiders, or involvement in a business or industry that is headed for a downturn. When one or more of these problems flares up, it can devastate the company’s earnings overnight and send its p/e ratio sky-high.

To get any real value out of p/e’s, investors have to look at them in the context of everything else that’s going on, in the market and in individual stocks.

What do you find most controversial about Warren Buffett’s investing?

Do you think Warren Buffett has just been lucky, or do you think he has a strategy that is worth emulating?