This isn't really that difficult. I get the feeling people make something simple into something difficult. If the cash registers are ringing and the stores are full, chances are better than even business is doing well. What trait allows you to figure this out? Common sense.
Buffett-style investing - a discussion
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This isn't really that difficult. I get the feeling people make something simple into something difficult. If the cash registers are ringing and the stores are full, chances are better than even business is doing well. What trait allows you to figure this out? Common sense.
Common sense is not very common: just watch Bill Miller kept buying BSC, FRE even when they are deteriorating.
I am not saying fundamental investing is impossible, I am just saying that if you compare your aspirations in fundamental investing to warren buffets success and style then you are in total denial of how good you can actually be. Where should you look to see results that could reflect your potential? Mutual Funds. Mutual Funds are full of people who never actually worked or run businesses. By the way the average mutual fund in the last 9 months is down so that tells you a lot about how well mediocre fundamental investors can do during rough economic times.
NRG is invested in wind power. Looks to be a future energy source bigger than it is now. My guess.
Good points from NioRio1. Buffet is a businessman who happens to invest in listed companies. Like other businessmen of this type he invests in what he knows (compare wth mutual fund port of 100 stocks) and finds good managers to run them so that he is free to look for other investments. There are many such people, many are billionaires. There are probably more billionaires of this type than there are traded market (i.e. hedge fund) billionaires.
You also have to look at the environment in which Buffet had cash to deploy, I am not denying the fact that he is a very sharp cookie but he was operating in his early days in a period when good assets were cheap(about to replay?)/US markets were still cyclical. I understand he bought most of KO in thye '87 crash - once in a long time opportunity.
This also brings to mind the second overlooked reason why his returns are so good, by buying during market shocks or when valuations are attractive because the market is depressed he is effectively eliminating the damage done by shocks to those who buy high up on a theoretical vs market valuation. i.e he is also making money by not losing money. You have to be market shockproof to survive long term unless you have unpararlelled fund raising ability.
I think there should be more emphasis on 'margin of safety' as part of the strategy - Buffet highlights Chap 20 of Graham's Intelligent Investor" as one of the two most important investment essays ever. Likelwise Seth Klarmann's 'Margin of Safety' which points out how the Wall St business/mrket structure forces those playing to do exactly the wrong thing - or lose their job. Most of the supposed investment greats seem to have one thing in common, at some point they were able to get investors to accept a 5yr plus time horizon for results - the ST results of which would get your average Portfolio Manager fired after a few qyuarters.
You also have to look at the environment in which Buffet had cash to deploy, I am not denying the fact that he is a very sharp cookie but he was operating in his early days in a period when good assets were cheap(about to replay?)/US markets were still cyclical. I understand he bought most of KO in thye '87 crash - once in a long time opportunity.
This also brings to mind the second overlooked reason why his returns are so good, by buying during market shocks or when valuations are attractive because the market is depressed he is effectively eliminating the damage done by shocks to those who buy high up on a theoretical vs market valuation. i.e he is also making money by not losing money. You have to be market shockproof to survive long term unless you have unpararlelled fund raising ability.
I think there should be more emphasis on 'margin of safety' as part of the strategy - Buffet highlights Chap 20 of Graham's Intelligent Investor" as one of the two most important investment essays ever. Likelwise Seth Klarmann's 'Margin of Safety' which points out how the Wall St business/mrket structure forces those playing to do exactly the wrong thing - or lose their job. Most of the supposed investment greats seem to have one thing in common, at some point they were able to get investors to accept a 5yr plus time horizon for results - the ST results of which would get your average Portfolio Manager fired after a few qyuarters.
If you had common sense you'd know the observation and its logical conclusions wouldn't apply in that case.
On another note would anyone know if Buffett is still maintaining his investment in AIG?
What do you all think of Wesco Financial Corp. (stock symbol WSC) right now? Berkshire Hathaway owns about 80 % of it so it must meet Mr. Buffett's criteria. The stock price is currently near a two year low price, price / book value ratio is about 1 and total debt is about 18 % of assets. Yahoo finance reports Mr. Buffett's partner Charlie Munger is Chairman of Wesco.
http://finance.yahoo.com/q/mh?s=AIG
I do not see Berkshire Hathaway listed as a major stockholder in AIG now.
I observe AIG current liabilities / current assets ratio is about 2:1 and the income statement shows three consecutive quarters of losses. AIG is likely having trouble paying it's debt obligations now.
Wesco has shareholder letters going back to 1997 on their website.
If someone knows how to get earlier ones, please share or let me know.
If someone knows how to get earlier ones, please share or let me know.