Warren Buffett Reiterates His Value Investing Strategy at 2025 Shareholders Meeting: Market Sentiment Influences Short-term Stock Prices

In May 2025, Warren Buffett reaffirmed his commitment to value investing during the shareholders' meeting, emphasizing that short-term market movements are driven by emotions, while in the long run, they align with the business's intrinsic value. He referenced Benjamin Graham's "Mr. Market" analogy, noting that low market sentiment presents a prime opportunity for value investing. Buffett mentioned that holding cash enables swift action when price and value are misaligned, and urged investors to concentrate on the business's long-term value instead of short-term price swings.

The Divide Between Price and Value: Insights from Mr. Market

"Mr. Market is your servant, not your guide." This quote from Warren Buffett originates from his mentor Benjamin Graham's classic metaphor from the 1950s. Mr. Market is a merchant who knocks on your door every day with a quote, his mood swinging unpredictably between optimism and pessimism. His quotes reflect market sentiment, not the true value of a business.

Buffett believes that short-term stock market fluctuations are often driven by investor emotions rather than changes in a company's fundamentals. He points out, "Price and value are completely different things; the market provides prices, not value." This perspective starkly contrasts with the mainstream financial theory of the "efficient market hypothesis." For Buffett, true investors should focus on a company's intrinsic value rather than being led by daily price fluctuations.

Opportunities in Market Volatility: Best Deals in Pessimistic Times

At the shareholders' meeting in early 2025, Buffett clearly stated, "We make our best deals when people are most pessimistic." This statement not only summarizes his decades of investment practice but also reflects his attitude towards market volatility. He not only does not fear market downturns but sees them as opportunities.

According to a report by Business Weekly, Buffett points out that value investors should hope for market declines because it allows them to buy quality companies at cheaper prices. He illustrates that if a company's intrinsic value is $10 and the market price falls to $5, this is "good news" for value investors because they can accumulate more shares at a lower cost.

This contrarian thinking defies most people's intuition. General investors tend to enter the market when prices rise and panic exit when they fall. But Buffett emphasizes that true value investors should shop like during a big sale, actively buy when prices are low.

Emotion and Knowledge: The Psychological Foundation of Value Investing

Buffett repeatedly emphasizes that controlling emotions is a key ability for excellent investors. He notes, "Excellent investors can control their emotions; when stock prices fall, they don't feel depressed but excited." This emotional stability stems from a deep understanding of a company's value and a long-term perspective.

He also mentions that financial education and the accumulation of knowledge can help investors reduce the risk of impulsive decisions. When investors can independently assess a company's value, they won't be swayed by Mr. Market's emotions. This ability allows value investors to calmly respond and make rational judgments during market bubbles or panics.

Long-term Perspective and Ownership Thinking

Buffett consistently emphasizes that stocks are not just trading tools but represent ownership in a business. He reminds investors, "When you own a stock, you actually own a share of a company." This mindset encourages investors to focus on a company's profitability, competitive advantage, and long-term growth potential from a business perspective.

He quotes Graham's famous saying, "In the short run, the market is a voting machine; in the long run, it is a weighing machine." This statement explains that in the short term, stock prices may fluctuate due to market sentiment, but in the long term, they will ultimately reflect the true value of the business.

Cash is King: Waiting for Price and Value Discrepancies

According to reports from Yahoo Finance and The Motley Fool, Buffett and his investment team have been net sellers of stocks over the past 10 quarters, with cumulative sales exceeding $174 billion. As of the first quarter of 2025, Berkshire's cash reserves have reached $347.7 billion.

This strategy reflects Buffett's cautious attitude towards current market valuations. He states, "We hold cash not because we like it, but because it allows us to act quickly when opportunities arise." This patient strategy of waiting for discrepancies between price and value embodies the core spirit of value investing.

Bubbles and Historical Lessons: The Unchanging Cycle of Human Nature

Buffett does not shy away from pointing out that market bubbles are the result of human nature. He mentions that from the tulip mania of the 17th century to the dot-com bubble of 2000, history repeatedly proves that humans find it difficult to learn from past mistakes. He believes that while the creation and bursting of bubbles cannot be precisely predicted, value investors can find undervalued assets through rational analysis and emotional control after a bubble bursts.

He reminds investors, "When something is worth $10, buying it at $5 in small amounts is a bad decision." This statement emphasizes that value investing is not just about buying cheap but buying "worthy" cheap.

References

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