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Author Topic: Exploiting the Wisdom of People Who've Been There (for autodidact)  (Read 29957 times)

Offline wilch23

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But we don't predict, we only speculate! Hehe

Offline Wills

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Well, you guys speculate the numbers and VIs don't predict the numbers! LOL

Offline Wills

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One of the best!

BRK Annual Meeting yr. 2009


What two industries are the first you should learn when developing your circle of competence?

Look for simple businesses. If I gave you $10M to invest right now and you only had three weeks to spend it and you could only spend it in Omaha, you’d look for simple, understandable, strong businesses. You look at the Nebraska Furniture Mart (NFM). You wouldn’t look at the third best fast food chain. You might look at McDonald’s, because it is number one and will probably always been number one. They have share of mind. What about Oracle? Too hard. GM? Too hard. You can’t predict the future for these two companies. Too many variables.

Investment knowledge is cumulative, and things you learn will make you better in the future. Stick to things you understand. Mrs. B at NFM wouldn’t get paid in Berkshire stock. Why? She doesn’t know stocks, but she knows furniture down cold. How do you beat Bobby Fisher? Play him in anything except chess. Even young people have a circle of competence even if they don’t have their thoughts perfectly organized.


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Offline Wills

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Student Visit 2007



Is there a moral connection to who you invest in?

Charlie and I went to Memphis to look at a chewing tobacco company. In the end, we decided we didn’t want to own it. We would buy stock in a tobacco company, but we didn’t want to own it.

A good example is Charlie’s favorite company, Costco. They are the #3 distributor in the US of cigarettes, but you wouldn’t avoid buying it because of that. You’ll drive yourself crazy trying to keep track of these things. Our philosophy is that it’s impossible to grade marketable securities, but we’ll buy the stocks without any problems, but we just won’t be in certain businesses.

My view is that energy production should move to nuclear. It’s clean, cheap and safe. Coal emissions are bad for the environment; however it’s still a good company. It’s impossible to grade marketable securities on moral activity. Berkshire Hathaway has and will buy what trades, but will not buy companies that engage in certain behaviors. PetroChina owns 40% of the oil in the Sudan that is government owned. If they did not own it, someone else would. Also, you have to keep in mind, if PetroChina did not buy it its possible the Sudanese would own 100% of the oil rights and that’s not so good either.

I find it funny that people find time to protest PetroChina for ownership of the Sudanese oil, but with the $300 billion or so of imported goods from China, these same people don’t protest Chinese goods. They protest investment in Chinese companies though.

Offline wilch23

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I don't know whether to laugh or cry, I presume it's Buffet talking here.
« Last Edit: Oct 23, 2013, 04:21 PM by wilch23 »

Offline chinito77

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Nice articles sir wills for posting what buffet said here. :cool2:

:yoohoo:

Ikaw na bagong idol ko  :watchuthink:

Offline Wills

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^salamat na-appreciate mo ang thread na ito.

Ikaw ang Idol ko na entrepreneur dahil matapang na bata ka!

Offline Wills

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The question is have I bought a company when the numbers tells me not to and how much is qualitative and how much is quantitative... The best buys had been when the numbers almost tells you not to, I mean… because then you feel so strong about the product and not just the fact you're getting a used cigar butt cheap.

- Warren Buffett

Offline Wills

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Emory's Goizueta Business School and McCombs School of Business at UT Austin yr. 2008



Who do you think will be one of the next greatest investors and are you partial to favoring someone with a similar investment style as yours?


Buffett: We just finished looking for someone. The Board has 3 candidates to replace me as CEO and 4 candidates to replace me as investor. They are all doing fine where they are, but they would be willing to come over to Berkshire for less pay.

In 1969, I wound up my partnership and I had to help people find someone to manage their money. I recommended Bill Ruane of Sequoia Fund, Sandy Gottesman, who is currently on the board at Berkshire, and Walter Schloss, who I wrote about in “The Superinvestors of Graham and Dodds-ville”. There’s no way they could miss.

But I don’t know many of the newer investors, they’re not my contemporaries. It’s not enough to just look at track records. They aren’t predictive and there will always be a few people that do well. I know guys who can make 50% a year with $5 million, but not with $1 billion. The problem with guys that do well is they attract so much money that it neutralizes their advantage. It’s hard to identify them, and even harder to make a deal to keep them from attracting other capital. It’s like betting on a 12 year old horse that won at 3 years old. It’s also important to AVOID MANAGERS WHO USE LEVERAGE. It’s the reason that investors with 160 IQs FLAME OUT.

Offline adam

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Hi sir wills,

what does it mean by this "AVOID MANAGERS WHO USE LEVERAGE"?

Offline Wills

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When choosing a candidate to replace him(Buffett) as an investor in Berkshire he avoids managers who uses leverage. Why?

Buffett knows the history of stock market and witnessed disasters because of using leverage, watch mo sa youtube yung Story of Long term Capital Management, sobrang high tech, sobrang talino ng grupo na yun at pati sarili nilang pera nilagay nila dun dahil matatalino sila, may extensive experience sila at may system sila na talagang sophisticated and yet bumagsak pa rin sila.

For us the lesson there is don't use leverage, I believe in leverage if you are entrepreneur but if you are investor or managing a portfolio.... Leverage is a NO NO!

« Last Edit: Oct 24, 2013, 11:17 AM by Wills »

Offline wilch23

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Leverage means betting more than what you have, in trading, that includes puts, shorts etc

Offline chinito77

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^salamat na-appreciate mo ang thread na ito.

Ikaw ang Idol ko na entrepreneur dahil matapang na bata ka!

Naku po sir... wala pa ako napapatunayan.. still has a lot to learn from experiences and wisdom of older people like you  :cool2:

When choosing a candidate to replace him(Buffett) as an investor in Berkshire he avoids managers who uses leverage. Why?

Buffett knows the history of stock market and witnessed disasters because of using leverage, watch mo sa youtube yung Story of Long term Capital Management, sobrang high tech, sobrang talino ng grupo na yun at pati sarili nilang pera nilagay nila dun dahil matatalino sila, may extensive experience sila at may system sila na talagang sophisticated and yet bumagsak pa rin sila.

For us the lesson there is don't use leverage, I believe in leverage if you are entrepreneur but if you are investor or managing a portfolio.... Leverage is a NO NO!



Totoo po un sa entreprenuership lng magagamit ang katalinuhan.. hehe stock market has a lot of factors to consider..  :yoohoo: kasama na dun emotion m.  :harhar:

Offline Wills

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Leverage means betting more than what you have, in trading, that includes puts, shorts etc

Yan ang malaking dahilan ng 1929 Great Depression

Offline Wills

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BRK Annual Meeting yr. 2009



Could you explain your opportunity cost decisions of the past year?

Buffett: Opportunity costs have been in the forefront of our minds during the last 18 months. It’s tougher to calibrate A, versus B, versus C in a fast-changing environment. Tougher and possibly more profitable. We got lots of calls [for potential investments]—most we ignored. We were called by Goldman Sachs on a Wednesday for $5 billion, and we [already] had a $5 billion commitment to Constellation Energy, $3 billion on Dow Chemical, $6.5 billion on the Wrigley Mars deal. We never want to get dependent on banks. It’s a good sign that we haven’t had the flurry [of phone calls] like last year. Normally, we would not have sold Johnson & Johnson if it were 10 – 15 points higher, [but we wanted to have a comfortable amount of cash on hand]. Our definition of comfortable is very comfortable.

[Comment: The real cost of any purchase isn’t the actual dollar cost. Rather, it’s the opportunity cost — the value of the investment you didn’t make, because you used your funds to buy something else.]

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