As we enter a new year it is always a good idea to give some thought to how we are going to approach investing as we go forward. This does not just have to do with specific investments but rather general categories. Are we going to follow the herd and buy into stocks that are in the news or will we look of sleepers that may turn out to pay multiples on our original investment when they catch fire. Are we in the investing game for the long term or are we going to be constantly jumping in and out of investments as we try to read the market and profit from its ebb and flow? Late in 2025 an investing legend stepped down from leadership at Berkshire Hathaway. Warren Buffett helped define what it means to be a successful long term investor. And he had useful advice regarding the predictability of our investments.
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Why Buffett Did Not Favor Tech Stocks
It was back in the 1980s when one of the original NASA astronauts was asked about what the next great thing in tech would be for investors. He gave an engineer’s answer. He said that it was hard to predict how a new technology would earn profits in the short term because in those days it commonly took five years to adapt new tech and create useful products. He was thinking, like Buffett, in terms of company cash flow and profits as they contribute to the intrinsic value of a stock. When asked by he did not have a lot of tech investments Buffett said that in the modern world technology moves so rapidly that one company that leads a field can lose their lead and see a lower stock price the next year because of new tech or new applications by another company.
Predictability and Investing
In many ways the most predictable thing about the stock market and many stocks is the constant up and down fluctuation as traders jump in and out of stocks or ETFs that track large segments of the market. For a long term profitable investment you want to be able to analyze forward looking cash flow and know that that cash flow will endure over time. For short term profits one often does well to predict what the Federal Reserve will do with interest rates, which are a major driver or short term market pricing. For the long term, investors are interested in how well a company is being managed and will be managed in future years as well as whether or not it has a strong brand such as with Coca Cola or Apple.
Why Would You Ever Sell IBM?
It was in the early 1980s and this writer was attending an investment seminar. A question put to the speaker was when to take profits from IBM. IBM was the dominant force in business computers with their giant mainframes. Its stock went up year after year and it paid a healthy dividend. It was, in fact, a classic widow and orphan stock. The person who asked the question simply wanted some guidance regarding taking a short term profit on this highly predictable stock. The answer to the question was, in turn, a question. “Why would you sell IBM?” This was the time when Jobs and Wasniack had invented the first personal computer and shortly before IBM realized that it had dropped the ball on a sea change in computing. IBM stock fell in response to their failure to get ahead in the microcomputer market. They subsequently offered their own personal computer using software the Bill Gates had purchased and repackaged laying the groundwork for Microsoft to become a giant in the computer software world. IBM is still a strong company across the world but not the single dominant force that it once was. Their story is a good lesson for long term investors who assume that companies and the market will continue as they have in previous years.
As you think about your investing for 2026 and beyond consider what the Fed will be doing and whether or not the bond and stock markets will continue to react as they have to Fed rate changes for your short term investing. Try to get a handle on the many coming uses of artificial intelligence and the disruptions it will cause in employment and the economy for the long term.