Realist said:
So Buffet has never invested?
Oh man I must have my facts wrong, I could have sworn he'd bought some shares at some stage.
Buffet is an investor first and foremost and a hands off businessman secondly.
This is from Wikipedia. http://en.wikipedia.org/wiki/Warren_Buffett
Management style
Buffett views himself as a capital allocator above anything else. His primary responsibility is to allocate capital to businesses with good economics and keep their existing management to lead the company.
When Buffett acquires a controlling interest in a business, he makes clear to the owner that:
he will not interfere with the running of the company;
he will make the hiring and compensation decision of the top executive; and
capital allocated to the business will have a price tag (a hurdle rate) attached; this process is to motivate owners to send excess capital that does not return more than its cost to Berkshire headquarters rather than investing it at low returns. [citation needed] This cash is then free to be invested in opportunities that offer higher returns.
Buffett's hands-off approach has held strong appeal and created room for his managers to perform as owners and ultimate decision makers of their businesses. This acquisition strategy enabled Buffett to buy companies at fair prices because the sellers wanted room to operate independently after selling.
The myth
Brilliant, Buffett has been deified by a media longing for color in the drab world of executive privilege and power. That he lives in the stucco house he bought more than 40 years ago for $31,500 in Omaha, Neb.; has modest Midwestern tastes for food and luxuries; drives his own American-made sedan; and plays cards with Bill Gates -- aw, shucks, he might just be America's grandpa, except for the fact he is not like you or me at all. He is the world's second-richest man.
You might have a weakness for chocolate. Warren, who controls See's Candies, likes private jets.
That the myth of Buffett is so pervasive is no accident. The "Oracle of Omaha" actually gives few interviews outside of his famous annual meeting in Nebraska each year. Those whom he does talk to, such as Fortune's Carol Loomis, are either on his payroll or don't dare criticize St. Warren lest they lose access.
But people as successful as Buffett don't accumulate $44 billion in wealth through charitable dealing. Long after the public turned on smoking and health, Buffett infamously explained his investment in the tobacco business: "It costs a penny to make. Sell it for a dollar. It's addictive. And there's fantastic brand loyalty."
It's also a huge health problem in the regions where his philanthropy will now flow.
Buffett, the son of a congressman, has reneged on contracts in dire times. His companies eschew disclosure. He has been constrained by the forces of economics that we all face, and he has made hard choices.
'Act of war'
The most glaring of Buffett's transgressions occurred six days after Sept. 11, 2001. Earlier that year, Buffett's Berkshire Hathaway had agreed to pay more than 70% of face value for $500 million in bonds issued by bankrupt finance company Finova Group. He broke the contract after 9/11 by invoking an "act of war" clause in his contract, citing the World Trade Center attacks less than a week earlier.
It was that decision, to not honor an agreement at a time when the country needed to come together, that for me solidified the notion that Buffett was not, after all, an outsider, but the coldest of Wall Street operators to the core. As Roger Lowenstein once wrote, "Wall Street's modern financiers have got rich by exploiting their control of the public's money: their essential trick has been to take in -- and sell out -- the public at opportune moments."
Warren Buffett did that in the days following Sept. 11.
That was not the only time Buffett has been ruthless in his business dealings. From his early years in the 1960s, Buffett has favored managers who slash costs, often through layoffs, to shine up his investments.
BRKB3,033.80, +28.79, +1.0% ) was founded as a textile company, and Buffett closed the last mill in 1985, a route followed with many of his textile investments that have faced overseas labor-cost pressure. Job cuts are a painful part of capitalism, and Buffett would not be successful had he not embraced them. But he has embraced that option often during his four decades as a CEO.
Realist said:This is for Julia
He was of the belief that as long as the market undervalued them relative to their intrinsic value he was making a solid investment. He reasoned that the market will eventually realize it has undervalued the company and will correct its course regardless of what type of business the company was in.
Realist said:What on earth are you trying to say Wayne?
Buffet is an investor - there is no doubt about that. He is also a businessman of course - who isn't?
Quite simply he made his money buying undervalued companies, kept them forever, reducing tax cause he never sold - what on earth is there to disagree with??
that opinionated blurb you posted is irrelevant. What was your point?
What do you disagree with exactly?
1. Buffet is an investor
2. he likes to hold forever (thus compounding, and not paying tax)
3. he bought companies when the price was in a downturn.
They are 3 indisputable facts.
WayneL said:Determining intrinsic value in a company, public or otherwise would require forensic accounting to cut through the garbage designed to decieve the plebs.
wayneL said:It shows that anyone who thinks they are buffetologists are off with the pixies.
WayneL said:You *can't* invest like Buffett. Therefore the private investor must employ a host of other techniques to optimize his or her investment practices.
..and try to proselytize only to cop an interdiction.Or they read Graham or Buffet and have a religious epiphany!
Whew!!! Thanks Cuttlefish, you've just stated the core of my (current) investment strategy.cuttlefish said:A smaller investor can't buy a whole business (though in some small caps it doesn't take that much of an investment to appear on the top 20 shareholder list) but they can adopt investment strategies that are based on principles espoused by Graham and Buffet successfully, which are based largely on treating a stock investment as a partial investment in a business and attempting to buy value when buying a partial business investment.
wayneL said:It shows that anyone who thinks they are buffetologists are off with the pixies.
Agree Wayne.
I strongly suggest your technique is suboptimal and that you are probably the least qualified on this board to comment on other techniques due to your religious adherence to a dogma promoted by those hitching a ride on the Buffett myth.
Sadly it may take 20 years for the troll to realise it.
Your studious avoidance of pertinent points reveals a narrow mindedness that is breathtaking to behold.
Still waiting on an answer for Nick`s question.
Indeed you are also a troll and have alluded to that fact yourself. My strong advise to you is to desist in trolling activities forthwith. We do our best to avoid having an aggravated community here and you seem to be doing your darndest to p!ss everyone off. Fair Warning!
Although its copped a fair bit of criticism in this thread, a fundamentals based approach will teach you a lot.
There's probably no clear safe option for a beginner entering the market, because the first thing to overcome in sharemarket investing is your emotions which will come into play regardless of your approach, but investing in companies with sound fundamentals is likely to lower your downside risk.
cuttlefish said:Thats a fairly paranoid attitude, almost implying that anyone running a public company deliberately provides misleading information in their annual accounts. There are obviously exceptions to the rule but on the whole many small and mid-cap company accounts are reasonably straightforward, unless I've been being duped for years.
I think it is demonstrable that there is a significant degree of "creative" accounting. To be sure, one must develop techniques to look behind the published numbers. This is beyond the capability of most investors, and we certainly cannot rely on analysts because of vested interests.
For someone that claimed there wasn't criticism of a fundamental investment approach on this thread this post sounds like criticism to me. (unless being 'off with the pixies' is a good thing lol)
It depends on which pixies we're talking about. There are good pixies and evil pixies. The good pixies are actually very good company.Seriously, I am *mildly* critical of FA , but only from a personal point of view because I have neither the capabitities nor the desire to analyse company accounts to the extent necessary. However, only a fool would criticize FA outright. Fundamentals DO ultimately drive price... apart from those interludes of pure insanity like the tech boom.
A smaller investor can't buy a whole business (though in some small caps it doesn't take that much of an investment to appear on the top 20 shareholder list) but they can adopt investment strategies that are based on principles espoused by Graham and Buffet succesfully, which are based largely on treating a stock investment as a partial investment in a business and attempting to buy value when buying a partial business investment.
Buffett doesn't actually espouse very much at all. Most of what is written is by those on the periphery.
However, I agree with what you say about trying to purchase value; very sensible. I am a value investor where value exists. But I don't see a helluva lot of it around atm.... especially with my opinion of where the economy is headed. :batman:
Chew on this: Small investors have a huge advantage over the Oracle of Omaha. While his returns may be limited because of the sheer size of his company, the typical individual faces no such limitation. This blog is about applying the wisdom of the Oracle to the small portfolio.
wayneL said:Buffett doesn't actually espouse very much at all.
Snake Pliskin said:What will it teach a beginner? I`m interested in the content here.
Nick Radge said:Unfortunately that is up there with other market misconceptions.
I am happy to debate but I, and no doubt others, would like a sensible answer. There are 3 cornerstone attributes to profitability and I do say that every trader/investor on the planet does pocess them. I'll give you two, you give the the third, then we'll discuss.
1. Win %
2. Win / Loss ratio
3. ?
$40,000 held for over 1 year with a 20% return = $5970 profit after tax and brokerage.
$5,000 traded 8 times quickly, all making 20% returns = $3920 profit after tax and brokerage.
That is why I say the more you trade the more you lose.
professor_frink said:Interesting example.
$3920 profit on $5000 (which is min requirement for your trading example)= 78% return
$5970 profit on $40000 invested= 15% return.
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