Warren Buffett: Investors Must Consider Stocks as Businesses, Not Speculations

In this interview with CNBC, Warren Buffett emphasizes the long-term perspective in investing, comparing stock investments to purchasing businesses, farms, or real estate. Using an example from 1932, he notes that General Motors had 19,000 dealers but sold only a fraction of a car per dealer during tough times, which proved to be a great buying opportunity.

He argues that market predictions cannot be made through newspapers or daily speculation. Instead, investment success comes from assessing the value of future earnings over decades.

Buffett highlights the irrationality of frequent stock decisions, urging investors to focus on fundamental value rather than short-term market fluctuations.

Here’s an excerpt from the interview:

Buffett: In 1932, General Motors had 19,000 dealers—that’s more than all the auto dealers in the United States today. There were only about 25 million people then, but they had 19,000 dealers. They produced or sold, and there was one month, I think, when they sold less than a tenth of a car—right, a tenth of a car per dealer. That was a terrific time to buy General Motors.

Forget about the market if you can. In a pretty good market, you don’t read the balance sheet on it. You certainly can’t predict the market by reading the daily newspaper, that is for sure. And you really can’t—you certainly can’t predict the market by listening to me.

But you’re buying businesses. If you planned to buy a local service station yesterday and it was closing today, I don’t think you’d tear your hair out or anything like that. You’d have already looked at where it was located, the contract it had with suppliers, and made a decision on competition.

People, because they can make decisions every second in stocks—whereas they can’t with farms—think an investment in stocks is different than an investment in a business, or an investment in a farm, or an investment in an apartment house. But it isn’t. If you get your money’s worth in terms of future earning power over the next 10, 20, or 30 years, you’ve made a good investment.

And you can’t pick them from day to day. I couldn’t do that. Well, I haven’t met anybody yet that knows how to do it.

You can watch the entire interview here: