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Stonks: How to Invest like the Oracle of Omaha
Disclaimer: This is not financial advice. This is a comedy website pretending to be a financial website, written by people who wear hard hats like most people wear cowboy hats.
We are not your fiduciary. We are not Warren Buffett. Do your own research. Read the 10-K. Understand what you're buying. And remember that past performance is not a guarantee of future results, especially if you're getting your market insights from a guy whose secret online username is guyyoudatebeforeyousettle69 and whose last "sure thing" was a company that made shoes for horses.
Also, nothing here is an invitation to mortgage your house, sell your grandmother's jewelry, liquidate your 401(k), or trade your children's college fund for something called MoonDog Inu because some internet gremlin mentioned the word "stonks." You have been warned.
STOCKS: THE STONKS PHILOSOPHY
First, let's establish something important:
"Stonks" isn't a typo.
It's a lifestyle choice.
It's the internet's deliberately stupid pronunciation of "stocks," generally deployed when someone has made a financially questionable decision and would like everyone to believe it was intentional.
Stonks are what happen when investing stops being about economics and starts being about:
Irrational exuberance
Hype
FOMO
Memes
That guy at the barbecue who somehow turns potato salad into a discussion about Bitcoin
And the universal human instinct to stare at a green number for six consecutive seconds and conclude:
"I have mastered capitalism."
You know the pattern.
Stock goes up 3%:
"I am a genius. I have cracked the code. They should put me on the cover of Forbes."
Stock goes down 12%:
"The market is rigged. The hedgies are manipulating everything. This is obviously a conspiracy."
Stock goes down 68%:
"I'm a long-term investor."
"This is just a buying opportunity."
"I never sell."
"I am a patient value investor."
"Please stop asking about my portfolio."
That's stonks.
And today we're going to talk about one of the greatest stonkologists who ever lived. The man. The disciplined. The Oracle of Omaha.
The guy who has somehow spent decades becoming one of the richest people on Earth while still behaving like someone who would complain about paying $14 for a sandwich.
We respect it.
WARREN EDWARD BUFFETT
THE ORACLE OF OMAHA
Warren Buffett became one of the richest people in human history by doing something so painfully simple that approximately 97% of investors immediately ignore it:
Buy excellent businesses for less than they're worth.
That's it.
No secret algorithm.
No proprietary trading software.
No guy in a Lamborghini screaming about options expirations.
No Discord server called WEALTH WARRIORS ELITE ALPHA SIGNALS VIP (Must have a six pack, $12,000 annual membership fee and small genitals to join).
No cryptocurrency named after a frog. No financial influencer standing beside a rented Ferrari explaining why you need to leverage your house to buy uranium futures.
Just:
Figure out what something is worth.
Wait.
Buy it when the price gets attractive.
Don't panic when everyone else panics.
Let time do the heavy lifting.
And eventually:
Profit.
This strategy has been around since humans started trading sheep for shiny rocks. Buffett just got obscenely good at it.
THE GENESIS OF A LEGEND
Here's the funny thing about Buffett.
People look at him today and see:
Berkshire Hathaway
A gigantic corporate empire
One of the greatest investment records in history
Billions of dollars
The annual shareholder meeting that attracts enough people to qualify as a small migration
And they forget something important.
He started small. Very small. Buffett bought his first stock at 11 years old.
Three shares of Cities Service Preferred for himself. Three shares for his sister Doris.
Price: About $38 per share.
That's right.
The Oracle of Omaha started with a stock worth approximately:
$228 dollars of stock in 1941.
Now where an 11 year old got the equivelent of today's money of: $5,240.00, thats a question for another day...
But he did not start with $38 billion. Not $380 million.
$228/ $5,240 dollars today.
But it was still not exactly the kind of money that makes the NASDAQ nervous.
And then the stock dropped.
Down to around $27.
Young Warren experienced one of the great rites of passage in investing:
"Oh pooky dookie. Money can go down. The jack benny show was wrong!"
A lesson apparently omitted from most financial TikTok courses. Eventually the stock recovered. Buffett sold around $40.
He made a small profit. $12 or $273 dollars of todays money. And then the stock went much higher. Which taught young Warren another important lesson:
Being right about a company isn't enough. You also need to understand your own behavior.
Because if you sell a good business the second it makes you a few dollars, congratulations. You have discovered the revolutionary investing strategy known as: "Chicken Out Early."
Buffett eventually got much better at this.
THE FETUS THEORY
There is, however, another explanation for Buffett's success. The man may simply have been born this way. According to absolutely nobody we can verify, Warren Buffett was already demonstrating an instinct for capital allocation in the womb.
Doctors heard strange noises. At first they thought it was a heartbeat.
It wasn't. It was Morse code. His mother reportedly heard:
BUY KO Pause. COMPOUND INTEREST Pause. SELL WHEN OVERVALUED
Pause. NO, MOM. NOT THAT ONE.
The nurse was confused. The doctor was concerned. The fetus was apparently trying to explain intrinsic value before developing a functioning digestive system. This has never been independently verified. But honestly?
We're not ruling it out.
BUY LOW. SELL HIGH.
Now let's get serious for approximately 12 seconds. The most basic investing principle in human history:
Buy low. Sell high.
Congratulations. We have solved Wall Street. Somewhere, a hedge fund manager just threw a $14,000 monitor through a window. Everyone can go home. Except there's one tiny problem:
Nobody knows what "low" means.
That's the hard part. A stock falling from $100 to $70 doesn't automatically mean it's cheap. It might be worth $150. Or it might be worth $30. The company could be thriving. Or it could be a burning dumpster that used to be worth $100. And a stock rising from $100 to $200 doesn't automatically mean it's expensive. It might be worth $300. The company might be compounding earnings so rapidly that $200 is a bargain.
The number on the screen isn't the value.
It's the:
PRICE.
And those are two completely different things.
That's where Buffett's philosophy becomes powerful.
PRICE IS WHAT YOU PAY
One of Buffett's most famous principles:
"Price is what you pay. Value is what you get."
Simple. Almost offensively simple. And yet people screw this up constantly.
They see:
COMPANY A
Stock price:
$8
"CHEAP!"
Meanwhile:
It loses $400 million every year
It owes $2 billion
Its competitive advantage is roughly equivalent to a wet napkin
Nobody wants its product
Congratulations. You bought a cheap stock. You did not necessarily buy a cheap business.
Now look at:
COMPANY B
Stock price:
$400
"EXPENSIVE!"
But the company:
Generates $40 per share in sustainable earnings
Has little debt
Dominates its industry
Has pricing power
Compounds earnings at 15%
Suddenly $400 doesn't look quite so insane.
The question isn't:
"What does the stock cost?"
The question is:
"What am I getting for that price?"
That's the entire game.
MEET MR. MARKET
Benjamin Graham, Buffett's mentor, came up with one of the greatest investing characters ever invented:
MR. MARKET
Imagine you own part of a business. Every morning, Mr. Market shows up at your house. He's sweating. He's manic. He's wearing three watches. He hasn't slept. He's carrying a briefcase full of charts he doesn't understand. And he's here to offer you a price.
Monday:
"I'll give you $100!"
Tuesday:
"Actually, $73."
Wednesday:
"OH MY GOD IT'S WORTH $41! SELL EVERYTHING!"
Thursday:
"THIS IS THE GREATEST BUSINESS IN HUMAN HISTORY! I'LL PAY YOU $190!"
Friday:
"I HAVE DISCOVERED THE GOLD MACHINE. $400!"
Same business. Same factories. Same employees. Same customers. Same products. Same cash flow. Different price.
Mr. Market is an absolute lunatic. And here's the beautiful part:
You don't have to listen to him.
If he offers you a ridiculous price?
Say:
"No thanks."
Go to work. Eat lunch. Walk the dog. Read another 10-K.
Come back tomorrow. See what kind of nonsense he's offering then. Because Mr. Market isn't your boss.
He's your emotionally unstable neighbor.
And fortunately, he knocks on your door every morning with another price.
THIS IS WHERE BUFFETT EXCELS
Most investors think they need to predict the market. Buffett's philosophy is basically: No.
You don't need to know what the market does tomorrow. You don't need to know whether the S&P 500 is up or down next Tuesday. You don't need to predict the next Federal Reserve announcement. You don't need to know whether some screaming guy on CNBC is bullish.
You need to know:
What is this business worth?
And:
What am I paying for it?
That's a completely different game. And unfortunately, it's harder.
Because now you have to read the boring stuff.
The 10-K.
The balance sheet.
Cash flow.
Debt.
Margins.
Capital expenditures.
Share dilution.
Competitive advantages.
Management.
Industry structure.
Future earnings.
And approximately 900 pages of corporate prose specifically designed to make you question every career decision you've ever made.
Somewhere around page 187, the CFO will explain that adjusted normalized non-GAAP recurring EBITDA before restructuring, stock compensation and other adjustments increased 14.7%.
You will stare at the paragraph. You will blink. You will question your education.
You will briefly consider just going back to being a excavator operator...
Keep reading. The money is usually hiding somewhere in the boring stuff.
BUFFETT DOESN'T BUY STOCKS
Well, technically he does.
But philosophically?
He buys:
BUSINESSES.
That's the distinction.
When you buy 100 shares of a company, you haven't bought a number that moves around on a screen. You've bought a tiny percentage of an actual business.
That business has:
Employees
Customers
Factories
Intellectual property
Cash
Debt
Competitors
Products
Problems
Opportunities
Management
And at least one executive who has used the phrase "synergy" without irony
The stock market simply gives you a daily quote on your ownership stake. The business creates the value. The market creates the price. And those two things can disagree.
Sometimes slightly.
Sometimes dramatically.
Sometimes so dramatically that you start wondering whether Mr. Market has recently suffered a head injury.
INTRINSIC VALUE
This is where everyone gets uncomfortable.
Because now we have to answer:
"What is this business actually worth?"
There isn't a giant neon sign floating above the company headquarters saying:
INTRINSIC VALUE: $87.43 PER SHARE
Sadly.
I have checked.
It would make investing much easier.
Instead, you estimate it.
You look at:
Current earnings
Free cash flow
Growth
Competitive advantage
Balance sheet
Future economics
Capital requirements
What similar businesses are worth
Then you make a conservative estimate. You might conclude:
"I think this business is worth approximately $100 per share."
Then you look at the market. $97
Interesting. $88
More interesting. $72
Now we're cooking. $51
WHERE THE OCHIE MOCHIE IS MY HARD HAT?
GET THE CHECKBOOK. WHO TURNED OFF THE MUSIC? WHY IS EVERYONE CALM?
MARGIN OF SAFETY
Another concept Buffett inherited from Graham:
If you think something is worth $100, don't necessarily pay $100.
You want a:
MARGIN OF SAFETY.
Maybe you wait for $80. Maybe $70. Why?
Because:
You might be wrong.
And this is where investing differs from tom cruise's religion.
You are allowed to admit you're wrong.
Your spreadsheet isn't a science fiction writers understanding of aliens. It's Excel.
Excel will happily calculate complete and utter lies with six decimal places of precision. Your assumptions could be wrong. The economy could change.
Competition could appear. Management could screw something up. The industry could collapse. Your spreadsheet could be lying because you accidentally entered a decimal in the wrong cell after drinking three redbulls to charge up.
The margin of safety gives you room. It's financial engineering's version of:
Measure twice. Cut once. Don't cut your thumb off.
AND THEN YOU WAIT
This is the hardest part. Not buying. Waiting. You don't have to buy something because you have cash. This is apparently extremely difficult for human beings.
Give a man $10,000 and tell him:
"You don't need to invest this today."
Within 48 hours he'll somehow own a fews shares in a lithium mining company in Paraguay. "The fundamentals are incredible."
What fundamentals? "There are minerals."
If everything is expensive:
HOLD CASH.
If the market is euphoric:
HOLD CASH.
If CNBC has six people screaming at each other:
MAYBE TURN OFF THE TELEVISION.
You don't need six people in expensive suits yelling at you to tell you whether something is worth $80. Because eventually something happens. Something breaks. A recession arrives. A company misses earnings. An industry falls out of favor. A CEO says something stupid and fires 900 people by zoom. A geopolitical crisis appears. Investors panic.
And suddenly:
Mr. Market is standing outside your house offering you a Ferrari for the price of a used Honda Civic. That's when you answer the door.
WHY STONKS MATTER
Stonks aren't about predicting the future. They're about understanding what you're buying. The Hard Hat Kings STONKS philosophy is:
HUMANITY -Is this something we actually want to support?
BUSINESS -Is this a great business?
FINANCIALS - Does it actually make money?
MOAT - Can competitors destroy it?
VALUATION - What is it actually worth?
PRICE - What is Mr. Market asking me to pay?
PATIENCE - Can I wait until the numbers become interesting?
That's the game. We're not trying to find the stock that goes up tomorrow.
We're trying to find the business we want to own for years and then wait until Mr. Market has an emotional breakdown.
THE ORACLE'S SECRET WEAPON
Buffett has repeatedly emphasized temperament and the ability to wait.
And that may be the most important lesson of all.
Because the market is specifically designed to make you feel like you're missing something.
BUY NOW!
BREAKING NEWS!
MARKETS RALLY!
MARKETS CRASH!
THIS STOCK IS THE NEXT NVIDIA!
THIS STOCK IS DEAD!
SELL!
BUY!
SELL!
BUY!
Meanwhile, somewhere in Omaha, Warren Buffett is probably eating a cheeseburger and wondering why everybody is screaming.
That's the advantage.
You don't have to participate in the insanity.
You can simply say:
"No thanks. That price sucks."
And go back to your life.
DON'T CONFUSE A BULL MARKET WITH GENIUS
This deserves its own section because apparently humanity needs reminding.
Everyone looks like Warren Buffett when everything goes up.
You buy something.
It goes up 30%.
Genius.
You buy something else.
It goes up 50%.
Master investor.
Your barber asks what you think about the market. You suddenly have opinions about monetary policy. Then the market drops 40%. And suddenly half the room discovers they were not actually Warren Buffett. They were just standing next to a rising elevator. There's a difference. A bull market can make a mediocre investor look brilliant. A bear market reveals whether you actually understood what you owned.
THE STONKS VERDICT
BUY LOW Not because the price is low. Because the price is low relative to the value of the business.
SELL HIGH Not simply because the stock went up. Because the price has risen beyond what you believe the business is worth.
HOLD When the business continues to compound value and the price remains reasonable.
WAIT When everything you want to own is stupidly expensive.
And most importantly:
DON'T CHASE.
You don't have to catch every opportunity. You only need to catch the opportunities where the business, price and your understanding all line up.
FINAL HARD HAT KINGS WISDOM
Warren Buffett didn't get rich because he possessed a secret list of magic stocks.
He got rich because he learned something painfully simple:
A dollar of value is still a dollar of value even when Mr. Market temporarily offers you 60 cents for it.
And sometimes Mr. Market offers you $2 for it. That's when you sell.
The market doesn't have to agree with you immediately. You don't need to be right tomorrow.
You need to be approximately right about the business and disciplined about the price.
That's why we're looking for shovels. That's why we're looking for moats.
That's why we're reading the 10-Ks. And that's why we're not buying something just because the chart looks like it was launched from Cape Canaveral.
Because the oldest investing strategy in human history still works:
BUY LOW.
SELL HIGH.
The hard part isn't knowing the words. It's knowing what "low" actually means.
And having the discipline to wait until you find it.
THE FIVE-YEAR RULE
Buffett famously said that if you're not willing to own a stock for ten years, you shouldn't even think about owning it for ten minutes. The exact timeframe isn't really the point.
The point is this:
If you wouldn't be comfortable owning the business for years, why the hell are you buying it?
If your entire investment thesis is:
"I think this thing will go up next Tuesday."
You aren't investing. You're trying to predict the mood of Mr. Market.
And as we've established: Mr. Market is a lunatic.
FINAL WORD
At the end of the day, investing is remarkably simple:
1. Find great businesses.
2. Figure out what they're worth.
3. Wait until they're on sale.
4. Buy.
5. Hold.
6. Repeat.
The hard part is doing it consistently. Because the market will test you. It will show you another stock going up 47% while yours does absolutely nothing. You will become jealous. You will question your life choices. You will stare at the stock. The stock will stare back.
DO NOT TOUCH THE STOCK.
You bought a business.
Not a Tamagotchi.
The market will whisper:
"Sell."
Then:
"Trade."
Then:
"Buy this other thing."
Then:
"Everybody else is getting rich."
And that's when you remember:
MR. MARKET IS AN IDIOT.
Fortunately, he's also your neighbor. And every morning he comes knocking on your door with another price. Eventually, he's going to offer you something stupid. That's when we buy.
SHOVEL HARD.
MOAT HARD.
STONKS HARD.
We wear hard hats because the market is a construction zone. Protective equipment is recommended. Financial competence is encouraged. Common sense is apparently optional.
Stocks: Stay safe out there.
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