Undervalued, not underperforming. Companies that others overlook but have solid fundamentals and great strategy.

An undervalued company is one that everyone else thinks is a loser but actually isn't - if you can identify that (and maybe make some adjustments to it) you can make a lot of money pretty quickly.

If it's undervalued it should be worth more, no?

Is Intel undervalued? Should Intel be worth more? Intel is an example of a company that I had in mind.

When people say undervalued in this context, they usually mean it has a low price to earnings ratio. Intel is definitely not that - although it could still be a good bet if you have reason to believe their fortunes will greatly improve in the future. But it wouldn’t be a Buffett target in its current state.

Actually, yes, half a year ago Intel was massively undervalued when you looked at metrics like Price to Book ratio. It still is actually, although not as much.

He calls them "cigar butts." His analogy is that you collect enough of them, and you have a whole cigar.

> I just asked ChatGPT

Please don’t do this.

> what Warren Buffett's strategy is, and it said buying undervalued companies and holding for a long time

No. It’s cheap leverage applied to low-volatility assets bought for a fair price [1]. (Munger got him off the ‘cigarette butt’ strategy of buying on the cheap.)

[1] https://www.nber.org/system/files/working_papers/w19681/w196...

According to the paper you posted (interesting analysis), it’s not just low-vol assets, but good quality ones. Also, they would no doubt do a lot more buying of undervalued (good quality) companies if they weren’t by this point “too big to care”, so to speak.