Strategies & Tips

5 Things Warren Buffett Wants You to Do in 2011

Warren Buffett

In his 2011 annual letter to shareholders [pdf download], Warren Buffett offered a variety of insights for business owners. Here are five of my favorite pearls of wisdom from the Oracle of Omaha:

BNET | John Warrillow

Warren BuffettIn his 2011 annual letter to shareholders, Warren Buffett offered a variety of insights for business owners. Here are five of my favorite pearls of wisdom from the Oracle of Omaha:

1. Don’t throw the baby out with the bath water

Berkshire Hathaway has a significant exposure to the U.S. housing market, yet instead of selling assets or de-prioritizing the industry, Buffett made some additional investments in his housing-related businesses, including purchases of the largest brick manufacturer in Alabama, a new $55-million plant for roofer Johns Manville and five “bolt-on” acquisitions for MiTek.

Takeaway for business owners: Don’t mistake an industry in a cyclical downturn for a business in trouble.

2. Keep your “elephant gun” loaded

“Our elephant gun has been reloaded, and my trigger finger is itchy,” writes Buffett.

Berkshire Hathaway is sitting on $38 billion in cash, which means it has the resources to buy when others are keen to sell.  For example, Buffett deployed $15.6 billion in the 25 days of chaos that followed the Lehman bankruptcy of 2008. Although markets have stabilized, he is still on the hunt for opportunities.

Takeaway for business owners: Build up a war chest of cash — maybe one or two months’ revenue — to pounce on opportunities when others are playing defense.

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