When investing in a company, CNBC's No. 1 financial advisor agrees with Warren Buffett: 'He likes cash flow' (2024)

George S. Farra (far left), co-founder and principal of Woodley Farra, and the team at Indianapolis-based financial advisory firm, which comes in at No. 1 on the CNBC FA 100 list for 2022.

Portfolio manager George S. Farra is good at remembering his mistakes.

More than a decade ago, he invested his clients in Hewlett-Packard, a choice he'd come to regret.

During the five years they held the stock, its share price "never really went up from the time that we bought it," said Farra, which he attributed in part to the constant turnover of management at the company.

"And we hung in there. It was a tough, tough slog," he added. But he learned from that experience.

"The Hewlett-Packard experience is at the forefront when we're making a decision about buying a new stock," Farra said. "When a company enters a period of management turmoil, it's a good idea to move on. At the end of the day, you're buying management."

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Overall, his firm, Woodley Farrain Indianapolis, sells fewer than a quarter of its stocks each year. It's content with the performance of its other selections, some of which have remained the same since Farra co-founded the firm in October 1995, like Chevron. A $10,000 investment in the energy company back then would be worth around $175,000 today, according to Morningstar Direct.

This year, Woodley Farra, which has $1.4 billion under management and roughly 1,000 clients, came in at No. 1 onCNBC's list of the top 100 financial advisorsin the U.S. for 2022.

"We take the attitude when we're investing in a company that we're becoming owners of that company," said Farra, who earned a bachelor's degree in finance from Indiana University in 1982. He is also a chartered financial analyst.

A mission to offer investors research and planning

Farra opened the firm 27 years ago with his partner, Don Woodley, after noticing a shortage in Indianapolis of financial advisory firms that did individual research on stocks and provided clients with comprehensive financial planning.

Today, the firm has 11 people on staff, six of whom are CFAs. People usually train for around four years to get that designation, studying investments, corporate finance, economics and portfolio management.

Most of the heavy research at the firm is geared toward making choices that will turn enough of a profit to get clients through the era of their lives when the paychecks end.

"Our planning is focused on helping clients forecast how their portfolios are going to look in retirement," Farra said.

When investing in a company, CNBC's No. 1 financial advisor agrees with Warren Buffett: 'He likes cash flow' (1)

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Clients are always worried about their later years, he said. They ask him, "Am I going to have enough money? Will I be able to live a good life? Will I be able to leave money to my kids when it's my time to go?"

"What we're trying to do is to help the client bring the future into the present," Farra said. "We help them prepare by encouraging savings and putting as much of their portfolio as possible into the stock market."

Focusing on dividend-paying stocks

Something that makes Woodley Farra a little unique, he said, is that since it first opened, it is focused on buying dividend-paying stocks.

That strategy — in which companies pass on a portion of corporate earnings to shareholders — wasn't highly popular nearly three decades ago, but it led Woodley Farra's clients to actually see their portfolios rise for much of the early 2000s bear market.

"The payment of a dividend conveys a lot of information about the company and its prospects," Farra said. It indicates that it probably has a healthy cash flow, is profitable and likely will continue to be so, he said.

It's similar to what Warren Buffett looks for at a company, Farra said: "He likes cash flow."

What we're trying to do is to help the client bring the future into the present.

George S. Farra

co-founder and principal at Woodley Farra

Despite recent drops in the market and fears of a recession, Farra believes investing in stocks is still the smartest way for people to achieve their financial goals. He believes the Federal Reserve will soon get inflation under control and that the worst drops for stocks are likely behind us.

Yet he said people are overloaded with negative or sensational news today that lead to bad decisions.

"Information is so abundant as compared to 20 years ago or 40 years ago, and it travels very quickly," he said. "'The Dow is going to drop another 30%,' or, 'It's going to go up 50% from here,'" he said.

"Those are all just opinions," Farra said.

He helps his clients avoid rash moves that tend to be made more with emotions than with logic.

"The data supports that trying to time the market is a fool's errand," he said. "And the data is what we go by."

As a result, the firm is staying out of the cryptocurrency space for now.

"It's a nascent technology and its value is hard to put your finger on," Farra said. "You're not sure if bitcoin at $20,000 is worth $20,000, or $2,000 or $200,000. We have no idea. There's nothing behind it."

"You can get your arms around the U.S. dollar," he added. "It's hard to get your arms around cryptocurrency."

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By analyzing these concepts, it's evident that George S. Farra and Woodley Farsky.

By analyzing these concepts, it's evident that George S. Farra and Woodley Farraanalyzing these concepts, it's evident that George S. Farra and Woodley Farra's these concepts, it's evident that George S. Farra and Woodley Farra's financialpts, it's evident that George S. Farra and Woodley Farra's financial advisoryt's evident that George S. Farra and Woodley Farra's financial advisory approachs evident that George S. Farra and Woodley Farra's financial advisory approach ist that George S. Farra and Woodley Farra's financial advisory approach is groundedthat George S. Farra and Woodley Farra's financial advisory approach is grounded ine S. Farra and Woodley Farra's financial advisory approach is grounded in longrra and Woodley Farra's financial advisory approach is grounded in long-term and Woodley Farra's financial advisory approach is grounded in long-term,and Woodley Farra's financial advisory approach is grounded in long-term, datand Woodley Farra's financial advisory approach is grounded in long-term, data-drivenWoodley Farra's financial advisory approach is grounded in long-term, data-driven investmenty Farra's financial advisory approach is grounded in long-term, data-driven investment strategiess financial advisory approach is grounded in long-term, data-driven investment strategies andnancial advisory approach is grounded in long-term, data-driven investment strategies and comprehensiveisory approach is grounded in long-term, data-driven investment strategies and comprehensive financialpproach is grounded in long-term, data-driven investment strategies and comprehensive financial planningproach is grounded in long-term, data-driven investment strategies and comprehensive financial planning toach is grounded in long-term, data-driven investment strategies and comprehensive financial planning to helph is grounded in long-term, data-driven investment strategies and comprehensive financial planning to help clientsis grounded in long-term, data-driven investment strategies and comprehensive financial planning to help clients achieveded in long-term, data-driven investment strategies and comprehensive financial planning to help clients achieve theirlong-term, data-driven investment strategies and comprehensive financial planning to help clients achieve their financialrm, data-driven investment strategies and comprehensive financial planning to help clients achieve their financial objectives and recessionstment strategies and comprehensive financial planning to help clients achieve their financial objectives. strategies and comprehensive financial planning to help clients achieve their financial objectives.strategies and comprehensive financial planning to help clients achieve their financial objectives. S. Farra believes in the long-term benefits of investing in stocks. He remains optimistic that the Federal Reserve will control inflation, and he advises clients to avoid making emotional decisions based on sensational news, emphasizing the importance of data-driven strategies.

  1. Stance on Cryptocurrency:
    • Woodley Farra is currently staying out of the cryptocurrency space. Farra expresses skepticism about the nascent technology, stating that the value of cryptocurrencies is challenging to assess, unlike traditional currencies like the U.S. dollar.

In conclusion, George S. Farra and Woodley Farra's success stem from a combination of prudent investment strategies, a focus on comprehensive financial planning, and a commitment to long-term value creation for their clients.

When investing in a company, CNBC's No. 1 financial advisor agrees with Warren Buffett: 'He likes cash flow' (2024)

FAQs

When investing in a company, CNBC's No. 1 financial advisor agrees with Warren Buffett: 'He likes cash flow'? ›

When investing in a company, CNBC's No. 1 financial advisor agrees with Warren Buffett: 'He likes cash flow' Woodley Farra, which has $1.4 billion in assets under management and 1,000 clients, came in at No. 1 on CNBC's ranking of the top 100 financial advisors in the U.S. for 2022.

What does Warren Buffett suggest investing in? ›

Key Points. Warren Buffett made his fortune by investing in individual companies with great long-term advantages. But his top recommendation for anyone is to buy a simple index fund. Buffett's recommendation underscores the importance of diversification.

What is the investment strategy followed by Warren Buffett? ›

Buffett follows the Benjamin Graham school of value investing. Value investors look for securities with prices that are unjustifiably low based on their intrinsic worth. There isn't a universally-accepted method to determine intrinsic worth but it's most often estimated by analyzing a company's fundamentals.

What will Warren Buffett do with all that cash? ›

Still, Buffett admitted greater ambitions when asked at last year's annual meeting about prospects for the cash. “What we'd really like to do is buy great businesses,” he said. “If we could buy a company for $50 billion or $75 billion, $100 billion, we could do it.”

How does Warren Buffett calculate free cash flow? ›

First, he studies what he refers to as "owner's earnings." This is essentially the cash flow available to shareholders, technically known as free cash flow-to-equity (FCFE). Buffett defines this metric as net income plus depreciation, minus any capital expenditures (CAPX) and working capital (W/C) costs.

What stock is Buffett buying? ›

Which stocks is Warren Buffett buying?
Company name & symbolPercent change in share count over quarterValue of investment at end of quarter
Sirius XM (SIRI)316%$220,129,000
Chevron Corp. (CVX)14%$18,808,080,000
Occidental Petroleum (OXY)9%$14,552,270,000
Mar 4, 2024

What is Warren Buffett's number 1 rule? ›

"The first rule of an investment is don't lose [money]. And the second rule of an investment is don't forget the first rule. And that's all the rules there are." This quote from legendary billionaire investor Warren Buffett has become one of his most well-known aphorisms.

What is Warren Buffett 70 30 rule? ›

A 70/30 portfolio is an investment portfolio where 70% of investment capital is allocated to stocks and 30% to fixed-income securities, primarily bonds.

What is Warren Buffett's 90 10 rule? ›

Warren Buffet's 2013 letter explains the 90/10 rule—put 90% of assets in S&P 500 index funds and the other 10% in short-term government bonds.

What is Warren Buffett's 5 25 rule? ›

One of the key principles that Buffett follows is to focus on the most important things. He has said that he only spends 25% of his time on the top 5% of his activities, and the other 75% of his time on the bottom 95%.

Can I ask Warren Buffett for money? ›

Warren Buffett typically does not give money to individuals, although he frequently donates to charities. However, he has in the past forwarded individual requests for money to his sister, Ms. Doris Buffett, who operates an organization called the Sunshine Lady Foundation.

How much cash is Warren Buffett sitting on? ›

Warren Buffett Is Sitting on $168 Billion of Cash.

How much does Warren Buffett have in cash right now? ›

He May Have Just Revealed Why, and It Makes Total Sense. Some of the most successful and revered coaches have something in common: They are OK with taking risks, but not gambles. This is a subtle nuance that can also be applied to investing.

What does Warren Buffett say about investing in the stock market? ›

Warren Buffett Says the Stock Market Is Like a Casino — Investors Should Resist 'Foolishness' Berkshire Hathaway CEO Warren Buffett sees increased “casino-like behavior” in financial markets — and is reminding investors it's hard to beat the house gambling.

What did Warren Buffett tell his wife to invest in? ›

The percentage may shock you.

Part of the cash would go directly to his wife and part to a trustee. He told the trustee to put 10% of the cash in short-term government bonds and 90% in a low-cost S&P 500 index fund.

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