Every one wants to become like Warren Buffet. What is it that made Warren Buffet as Warren Buffet. Lets soak up some of Buffett's wisdom for investors. He writes insightful essays in annual reports and letters to shareholders. You can look them up at berkshirehathaway.com.
Buffett also answers questions from shareholders at the company's annual meetings. Here are some samples from the most recent meeting.
- Patient investing. We have $16 billion in cash not because of any predictions [about a market decline], but because we can't find anything that makes us want to part with that cash. We're not positioning ourselves. We just try to do smart things every day, and if there's nothing smart, then we sit on cash.
- Commitment. If we start buying a stock, we want to go in heavy. ... We've made some big mistakes starting to buy something that was cheap and within our circle of competence, but trickled off because [the] price went up a bit. Good ideas are too scarce to be parsimonious with.
- The big ones. I used to handicap horses. ... If someone asked me to handicap the 500 companies in the S&P 500, I wouldn't do a very good job. You only have to be right a few times in your lifetime, as long as you don't make any big mistakes. Ted Williams, in his book The Science of Hitting, talked about how he carved up the strike zone into different zones and only swung at pitches that were in his sweet spot. Investing is the same way.
- Coca-Cola. When I talked about Coca-Cola being an "inevitable," I talked about the probabilities that Coke will dominate the global market for soft drinks. I don't think anything will change that. It has a huge distribution system and position in people's minds worldwide. They'll make a little more profit per drink sold over time as well. I don't know how anyone could dethrone them.
- More on patience. If the market closed for years, we wouldn't care. Would still keep making Sees candy, Dilly bars, etc. If you focus on the price, you're assuming that the market knows more than you do. That may be the truth, but in that case you shouldn't own it. The stock market is there to serve you, not to instruct you.
- Meeting with management. Almost everything we learn is from public documents. ... We do not find it particularly helpful to talk to managements. ... The numbers tell us a lot more than the managements. We don't give a hoot about anyone's projections. We don't want even want to hear about it.
- Stock options. Options are a royalty on the passage of time. They put management's interests contrary to the interests of shareholders. We believe in tying incentives to things under management's control. To give a lottery ticket to someone who runs 1 percent of Berkshire is really crazy. We saw more crazy stuff in the 1990s than in the previous 100 years.
- Banking. If you can just stay away from following the fads and making bad loans, [it] has been a remarkably good business. Since WW II, return on equity for banks that have stayed out of trouble has been good. Some large well-run banks earn 20 percent ROE. I've been surprised that margins in banking haven't been competed away. ... Some banks get into trouble making bad loans, but you don't have to.
- Sticking with what you know. I know people will be drinking Coke, using Gillette blades and eating Snickers bars in 10-20 years and have [a] rough idea of how much profit they'll be making. ... Somebody will make money on cocoa beans, but not me. I don't worry about what I don't know — I worry about being sure about what I do know.
No comments:
Post a Comment