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

Portfolio manager George S. Farra is bully astatine remembering his mistakes.

More than a decennary ago, helium invested his clients successful Hewlett-Packard, a prime he'd travel to regret.

During the 5 years they held the stock, its stock terms "never truly went up from the clip that we bought it," said Farra, which helium attributed successful portion to the changeless turnover of absorption astatine the company.

"And we hung successful there. It was a tough, pugnacious slog," helium added. But helium learned from that experience.

"The Hewlett-Packard acquisition is astatine the forefront erstwhile we're making a determination astir buying a caller stock," Farra said. "When a institution enters a play of absorption turmoil, it's a bully thought to determination on. At the extremity of the day, you're buying management."

Overall, his firm, Woodley Farra in Indianapolis, sells less than a 4th of its stocks each year. It's contented with the show of its different selections, immoderate of which person remained the aforesaid since Farra co-founded the steadfast successful October 1995, similar Chevron. A $10,000 concern successful the vigor institution backmost past would beryllium worthy astir $175,000 today, according to Morningstar Direct.

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This year, Woodley Farra, which has $1.4 cardinal nether absorption and astir 1,000 clients, came successful astatine No. 1 on CNBC's database of the apical 100 fiscal advisors in the U.S. for 2022.

"We instrumentality the cognition erstwhile we're investing successful a institution that we're becoming owners of that company," said Farra, who earned a bachelor's grade successful concern from Indiana University successful 1982. He is besides a chartered fiscal analyst.

Farra opened the steadfast 27 years agone with his partner, Don Woodley, aft noticing a shortage successful Indianapolis of fiscal advisory firms that did idiosyncratic probe connected stocks and provided clients with broad fiscal planning.

Today, the steadfast has 11 radical connected staff, six of whom are CFAs. People usually bid for astir 4 years to get that designation, studying investments, firm finance, economics and portfolio management.

Most of the dense probe astatine the steadfast is geared toward making choices that volition crook capable of a nett to get clients done the epoch of their lives erstwhile the paychecks end.

"Our readying is focused connected helping clients forecast however their portfolios are going to look successful retirement," Farra said.

Clients are ever disquieted astir their aboriginal years, helium said. They inquire him, "Am I going to person capable money? Will I beryllium capable to unrecorded a bully life? Will I beryllium capable to permission wealth to my kids erstwhile it's my clip to go?"

"What we're trying to bash is to assistance the lawsuit bring the aboriginal into the present," Farra said. "We assistance them hole by encouraging savings and putting arsenic overmuch of their portfolio arsenic imaginable into the banal market."

Something that makes Woodley Farra a small unique, helium said, is that since it archetypal opened, it is focused connected buying dividend-paying stocks.

That strategy — successful which companies walk connected a information of firm net to shareholders — wasn't highly fashionable astir 3 decades ago, but it led Woodley Farra's clients to really spot their portfolios emergence for overmuch of the aboriginal 2000s carnivore market.

"The outgo of a dividend conveys a batch of accusation astir the institution and its prospects," Farra said. It indicates that it astir apt has a steadfast currency flow, is profitable and apt volition proceed to beryllium so, helium said.

It's akin to what Warren Buffett looks for astatine a company, Farra said: "He likes currency flow."

Despite caller drops successful the marketplace and fears of a recession, Farra believes investing successful stocks is inactive the smartest mode for radical to execute their fiscal goals. He believes the Federal Reserve volition soon get ostentation nether power and that the worst drops for stocks are apt down us.

Yet helium said radical are overloaded with antagonistic oregon sensational quality contiguous that pb to atrocious decisions.

"Information is truthful abundant arsenic compared to 20 years agone oregon 40 years ago, and it travels precise quickly," helium said. "'The Dow is going to driblet different 30%,' or, 'It's going to spell up 50% from here,'" helium said.

"Those are each conscionable opinions," Farra said.

He helps his clients debar rash moves that thin to beryllium made much with emotions than with logic.

"The information supports that trying to clip the marketplace is simply a fool's errand," helium said. "And the information is what we spell by."

As a result, the steadfast is staying retired of the cryptocurrency abstraction for now.

"It's a nascent exertion and its worth is hard to enactment your digit on," Farra said. "You're not definite if bitcoin astatine $20,000 is worthy $20,000, oregon $2,000 oregon $200,000. We person nary idea. There's thing down it."

"You tin get your arms astir the U.S. dollar," helium added. "It's hard to get your arms astir cryptocurrency."