“What tells you whether you should continue to own a stock is . . .”

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Billionaire investor and investment guru Warren Buffett once shared the rule of thumb he uses for when to exit a stock, and in the process explained why investors are better off than business magnates like Andrew Carnegie or John Rockefeller.

What happened: “I like it when the things we buy go down,” Buffett said in a 2014 Fortune magazine interview. He said he would get “euphoric when stocks are down because he can buy more of something he owned. On the other hand, with their actions, people think the stock knows more than they do, he said.

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“When the stock goes down, they say the stock is telling them something … and what it’s telling me is that I can get more for my money,” Berkshire Hathaway said the CEO. But they’re taking it as a kind of referendum on themselves and making it a ‘me versus the stock’ and saying if they get back what they paid for, they’re going to sell the stock regardless of what they paid, he said.

“Stock doesn’t care what you paid; you have to remember that the stock doesn’t even care that you own it; you are nothing to stock; action is everything to you,” Buffett said.

The only question with every stock, every day is to look at “Can I get more for my money elsewhere,” he said, adding that investors have the chance to be in thousands and thousands of great businesses and their prices are change all the time. so is their relative rating.

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Because an investor can switch at very low cost these days, with little or no fees, he can switch from one business to another at any time, Buffett said. Investors have an advantage over Carnegie, who worked in the steel industry, or Rockefeller, who was in the oil business, he said. The billionaire said these businessmen could not immediately jump into something like retail or rearrange their business empire the way an investor can with the portfolio they own. The portfolio can be rearranged in one go at virtually no cost, he said, adding that this is a huge advantage.

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“There is nothing about share price action that tells you whether you should continue to hold; what tells you whether you should still own it is what you expect the company to do in the future relative to the price it’s selling for now compared to other business opportunities you think you know as well and do the same comparison and that’s still there is to own stocks,” Buffett said.

Why it’s important: Buffett swears by an investment philosophy called value investing, which advocates picking stocks that appear to be trading at less than their intrinsic or book value. He has had great success with the strategy, and Berkshire’s success is a testament to that. The company, which has holdings mainly in insurance and shipping businesses as well as portfolio stocks, is now the eighth most valued global corporation, going head-to-head with technology stocks.

Amid the current economic uncertainty, Buffett has shown a preference for accumulating a huge pile of cash. At the end of the second quarter, the company had a massive cash pile of $277 billion.

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This article Warren Buffett tells investors to ditch the “Me vs. The Stock Approach: “What Tells You Whether You Should Continue to Own a Stock Is…” originally appeared on Benzinga.com