What is the most expensive stock in the world?
Naturally, you would think about worlds most expensive companies like Amazon or apple.
Believe it or not, this company is twice smaller than Apple and yet it's the stock price is
multiple times higher.
It's probably more expensive than your mortgage.
In fact, you would have to save every penny you earn for 6 straight years to be able to
buy this stock.
In other words, if you want to invest with Warren Buffet, you should have at least 322
200 dollars to buy a single stock.
That's not surprising considering that the stock price has increased by almost 8 thousand
since the company was founded.
Graph If you would have invest just a thousand dollars
back then in Berkshire Hathaway, you would have made around 10 million dollars by 2014.
Of course, we can't go back in time and invest in this company but what we can do is learn
how to invest like him.
and in this video, we are going to breakdown his two most important rules of investing.
The first one is - Never Lose Money!
I know that it sounds quite absurd as if Buffett is making fun of us, but if you give it a
closer look there are logical reasons why most people lose money in the stock market,
and your job is to simply avoid these traps by understanding the rules of the game that
many investors neglect.
If you take a look at the companies that are traded in the market, they have a price tag,
but because no one can afford that, even you Jeff, they are broken down into many many
stocks, but the key question here is, does this company really worth 925 billion dollars.
The answer is No.
You see there is a big difference between the price and value.
The stock price jumps up and down every single day, even slightly negative news that could
be even fake can drive the price down However not the value because the value is what the
company really worth.
For instance, Apple released iPhone XR at the end of 2018, and sales weren’t as high
as people expected, as a result of that, Apple got a lot of negative press, which drove
the stock price down from 230 dollars to 160 dollars within 3 months.
That's a really big jump!
But did the company became 30 or 40 percent less valuable in such a short period of time!
Of course No, even though iPhone sales were down, the company recorded higher profit compared
to the previews year! that's exactly why the stock price jumped back to over 200 dollars.
when the entire world was talking about how Warren buffet lost billions of dollar because
he invested in Apple, he didn’t give a damn.
He even wanted the stock to decrease further so that he can buy more of it.
Because he understands the difference between value and price.
In fact, He once said: Risk comes from not knowing what you are doing.
In other words, Warren doesn’t like taking the risk because he knows that you might lose
money when you take the risk which violates his first rule of investing: Never lose money.
So he only invests in businesses that are clearly undervalued.
Of course, you can't completely eliminate the risk but you can decrease it to its bare
minimum.
In 2002, Buffett came across a company called, PetroChina, after looking at its financial
statements, it was clear that this company worth around a hundred billion dollars, but
when he looked at its stock price, the company was valued only at 30 billion
dollars, he knew that its a golden opportunity.
and based on the political climate, Buffett anticipated that oil prices will either rise
or at least stay stable.
So he invested almost half a billion dollars in this company (488M).
Guess what happened, with the rise of oil price, the company didn’t only reach a 100
billion dollar valuation as buffet thought, it skyrocketed to 275 billion dollars.
Buffet sold his share and made 3.6 billion dollars.
Not bad, right!?
All right, we are clear about the first rule, but what about the second one!
Never forget rule one!
I know that it sounds absurd, but if you take a look at any company Buffett has invested,
you will notice that he followed the exact same philosophy!
and since it made him worlds the richest investor, I think it works!
So, Good luck!