Does Warren Buffett Buy Penny Stocks?

Does Warren Buffett Buy Penny Stocks? One question that has arisen surrounding the penny stock market has been if Warren Buffett buys penny stocks. If you read and understand the elaborate, widely publicized investing strategy of Warren Buffett you'll see that he doesn't specifically target the penny stock arena. He is outspoken regarding his investing rules and focuses his investing on healthy financials, but he also likes value prices on stock so let's explorer this a little more in depth. World's Greatest Investor There is no question Warren holds the title of "world's greatest investor". How did he get there anyway? Warren prides himself on finding wonderful companies at fair prices and not fair companies at wonderful prices. This concept has been successful to say the least. Penny stocks typically trade at wonderful prices. The scholars like to call them growth stocks or micro-caps. The growth stock moniker is usually attached to companies looking to build on a concept, product, or service that is not yet profitable. A micro-cap company refers to a company with little financial value or one who possesses limited assets. These attributes are typical of wonderfully priced stocks since they scream high risk. Does world's greatest investor want high risk assets? Not really. Buffett's Biggest Holdings Let's briefly explorer some of his biggest interest. Let's start with the top five just for the sake of discussion. Currently his biggest holdings are Apple (AAPL), Bank of America (BAC), Coca Cola (KO), and Chevron (CVX). If you average the latest stock prices per share of the top five holdings you'll see an average of approximately $118.00 per share. Now this figure doesn't carry much weight in the real world, except for the sake of the penny stock query. He typically likes insurance companies, railroads, energy, banking, and a select few tech giants. None of his most favorable interests can be considered micro-cap or growth companies. In fact, the lowest price per share holdings in his current portfolio is a pharma name trading near the $10.00 per share range. Why Does He Avoid Penny Stocks? Mr. Buffett avoids penny stocks for quite a few reasons. Any stock considered a growth stock is a gamble to say the least, and he's publicly states that he's not a gambling man. The micro-cap valuation of a company also tells the world that it's a high risk investment, once again, testing fate with a certain level of gambling. Avoiding penny stocks also has to do with liquidity. The lack of liquidity on many of these penny stock names results in a wider bid-ask spread making for more difficult buys and sells, not something a large scale investor wants in their portfolio. the more speculative the company, the less likely it will attract major players. If the past is any indication of future investing from Warren Buffett, we won't see much emphasis placed on penny stocks. His successful recipe for wonderful companies at fair prices will march on... Learn more in our penny stock forum

Comments

Post a Comment

Popular posts from this blog

A Brief History of Marketing

A Brief History Of Marketing Marketing research dates back to biblical times by most estimates, The exact date is open for discussion, but regardless of its exact inception, it is a concept constantly evolving throughout the centuries. Even the wall art in caves can be considered marketing but that's a bit of a stretch... As much as 48% of what you pay for a product goes into the marketing, this is a remarkable statistic that really puts this industry into perspective. Marketing is and always has been a combination of qualitative and quantiative research. Qualitative research involves the people, or the customers, their habits, proferences, choices, etc. Quantitative research involves head count marketing, for example how many customers in a particular area or maybe how many units each customer will buy. Most good marketers will combine these two concepts for a hybrid quantiiative and qualitative approach. A skilled marketer will obtain and analyze data to build a marketing p
Read more

Where Does the Middle Class Find Affordable Dental Care?

Image
Middle Class Dental Where does the middle class find affordable dental care? It seems the system always favors either low income residents and those who are financially comfortable or just plain wealthy. Far too many people have to pick and choose their dental care because of their financial situation. What we see is dental care programs for low income households, these are common and necessary. And as for those who are well off, well we know how that goes... Either they have full coverage dental insurance or they have the cash in hand to cover any dental expenses at will. So where does the middle class fare in all of this? Middle class income statistics in the United States are always changing. In 2021/2022, the definition of the term "middle class" or "middle income" is a single American who earns approximately $30,000 to $90,000 per year. These specific numbers are open to discussion but, in general, this annual income range is fairly accurate. Exce
Read more

Are Penny Stocks a Waste of Time?

Are Penny Stocks a Waste of Time? Penny stocks sound attractive from the moment you hear that name. You can own stock in a legitimate company for a penny or less. This could be your chance to find the next Amazon or Google for just a penny. But are penny stocks a waste of time? The intrigue of instant wealth pulls retail investors into the stock market each and every day in search of the next big thing. What Makes Stock a Penny Stock? A penny stock is simply a micro-cap sized company, or a not-yet profitable growing company selling their stock for any price under 5 dollars per share. Some companies dispense their shares for fractions of a penny per share, that's right, you can actually purchase multiple shares per penny in some cases. The 5 dollar max per share is a rule of thumb but not an exact figure. It is based on the fact that many money managers' entry point for institutional, or large scale investments is around 5 dollars per share because of stability in prices
Read more