Five Things I Learned From Chris Davis About Intelligent Investing

"We can't predict," said Davis, "[but] we can prepare."

A few weeks ago, Bloomberg Wealth released an interview with Berkshire Hathaway director Chris Davis. His lessons are never flashy — but, really, that’s their strength. In a world chasing meme stocks and quick wins, Davis offers a safer, steadier path.

Intelligent investing, he reminds us, is about seeing businesses for what they are — engines of value that, when chosen wisely, can build wealth over decades.

Success is less about outsmarting the market than outlasting it. Avoid the behavioral pitfalls that derail others and let the quiet power of compounding work its magic.

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(1) “Value investing is a redundancy.”

Chris Davis has no time for the tired debate between value and growth investing. To him, that distinction ignores one of the core truths of the money game: All intelligent investing is value investing. How could it be anything else? Every investment is about buying more value than the price you pay for it — whether the stock is a beaten-down industrial giant or a high-flying tech darling pioneering artificial intelligence.

Growth is not the opposite of value. It’s a vital part of the evaluation process. “Often,” said Davis, “people make a distinction between growth investors and value investors. I would say that’s a strange distinction because a company that grows profitably is more valuable than one that doesn’t grow. So growth is a component of value.”

The key, as always, is to focus on the underlying business — its cash flows and its durable competitive advantages. As long as valuation discipline remains front of mind, then value can be found in low p/e businesses and high p/e businesses alike.

Value investing is not only about chasing cheap stocks, but in the acceptance that value lies in the long-term earning power of a business — not just its price tag today.

(2) “Stocks have this peculiarity that they are the only asset where somehow the more the price goes up, the more people want to buy them.”

While Davis sees intelligent investing as a big tent that can accommodate both so-called value and growth strategies, he draws the line at momentum investing. Which, unfortunately, has been a big part of the market over the past decade or so — with investors hopping on the bandwagon of rising stock prices without regard for underlying earning power. Momentum is a siren song for fools. A game of hope rather than analysis. And it usually ends in financial heartbreak when the music stops.

“There’s a whole category of people who get excited because stocks have already gone up and then they want to jump in,” said Davis. “So, in a sense, they are what I would call momentum investors — but they aren’t really value investors.”

Just because a stock’s price has risen in recent weeks and/or months does not mean it will continue to do so. Decisions should be made based on careful study of business fundamentals, not the naive belief that a line on the chart will keep going up forever.

(3) “I’m certain we’re going to have a recession. I’m just not sure when.”

It’s always a good sign when someone is secure enough to answer, “I don’t know.” Economic downturns are inevitable, but the industry’s track record of predicting them is Cleveland Browns-level bad.

Recessions are not a problem that can be wished away or avoided through deft portfolio management. Anyone who adopts a long-term, buy-and-hold strategy must be ready to batten down the hatches and ride out the storm.

“We know we’re going to own it through some sort of shock in the system,” said Davis. “We can’t predict, [but] we can prepare. We have to be prepared for the sunny days where we’ll make a lot of progress, but also to withstand the storms. Trying to predict the timing of those [in order to] reposition your portfolio, we think is a dangerous game.”

And, who knows, you might even turn volatility into an ally, rather than an enemy.

(4) “Both my grandfather and father loved what they did. That has a huge influence on a kid.”

Davis’s perspective on investing is deeply personal — which makes sense considering he comes from market royalty. Growing up as the grandson of Shelby Cullom Davis and the son of Shelby Davis, he was pretty much steeped in this world from the womb.

Above all, the scion of the Davis dynasty learned the importance of vocation — finding work that sets your soul on fire — from his illustrious forebears. This not only profoundly impacts your own life, but also those of the people around you.

Whereas Warren Buffett tap-dances to work, Chris Davis remembers his father excitedly bounding off the commuter train each evening after work. In stark contrast to his fellow worker bees. “I would go meet the train out in Tuxedo,” said Davis, “and all the commuters are getting off and they’re looking gray and worn with their briefcases and my father would sort of spring off the train. He loved what he did.”

His father even brought Chris along to visit companies on occasion — transforming stocks from abstract ticker symbols into living, breathing businesses. “We grew up knowing that they loved what they did [and] that it was interesting,” said Davis. “Stocks weren’t pieces of paper wiggling around on the news charts. They were ownership interests in businesses. It was always just sort of an interesting world.”

And, while Chris took a circuitous route into the money game — including a brief stop in the seminary — the joy and curiosity instilled by his father and grandfather eventually drew him back to exactly where he belonged. When you love what you do, you’re not just building wealth. You’re also building a legacy.

(5) “An investor should recognize that the biggest threat to their generating a return over time is their own behavior.”

This is also known as the Taylor Swift rule. In Anti-Hero, she sings: “It’s me. Hi. I’m the problem. It’s me.” That’s a refrain that every investor should have on repeat.

Even the best stock picks or savviest money managers cannot save you from yourself. If you chase every rally or panic at every bump in the road, there’s not a whole lot that can be done to rescue your returns. “That behavior penalty,” said Davis, “will swamp any other choices they make in terms of whether they picked great stocks, whether they hired a great manager, [or] whether they invested in a great fund.”

This is not exactly a new idea, but it’s one that bears repeating ad infinitum. In a recent podcast, Larry McDonald recounted some advice he received from Charlie Munger: “Human nature is your greatest enemy at market lows. At your absolute climax of fear, you must do the opposite of what you want to do. And, once you’ve done that, leave it alone because the real money is in the waiting.”

Irrational exuberance during bubbles, outright panic when stocks stumble, or FOMO from incessant market chatter all eat away at the disciplined behavior needed to be an intelligent investor. It’s a psychological battle that will be waged our whole lives. The ability to stay calm amid chaos — to ignore the ravings of Mr. Market and his cronies — is what separates the wheat from the chaff.

But, just like bad behavior can drown out even the best decisions, the right behavior can redeem flawed investments. “You can get in at the wrong time,” said Davis, “but, if you stay in, you can earn your way out of that. What really matters is the behavior.”

By committing to high-quality businesses and resisting the urge to chop and change in response to market swings, investors can harness the power of compounding over time. Patience is not just a virtue. It’s a superpower.