Buffett sees changes as the enemy of investments. The business which changes very quickly will make the net investments to equity investor huge negative. He is looking for ones that don’t change.
He doesn’t like to lose money. Capitalism is very brutal. The problem is not about lacking opportunities, it is the prices.
The reason Buffett wounded up his partnership in 1969 because he saw in that year it was tough. He had grown from $105,000 to $100,000,000. He won’t persist in trying to make money when he doesn’t understand what’s going on. It’s harder to invest and risk other people’s money than to invest your own money.
Investing is totally different game from other businesses, such as department store. Department store is the business that throws defensive decisions at the owner all the time. But in investing, just need to sit and wait for the right pitch.
In investment, he can recognize a 98 or 6, not a 63. He really tries to buy wonderful businesses at ridiculous prices. For Washington Post, the whole company was sold for $80 millions in 1973. Most analysts would have agreed that the intrinsic value of total assets would be worth around $400 to $500 millions.
To determine the value of $1 received one year from now, it depends on how much purchasing power $1 dollar has in a year. One needs to find the present value of that $1 dollar, using discount rate (i.e Treasury of equivalent maturity). It is similar to analyzing the stream of company’s earning flow. Besides, investor needs to be aware of the change in medium to long term rate.
The easiest person in the world to fool is yourself. People believe what they want to believe. Everyone rationalizes their actions. And according to Keynes “The difficulty lies, not in the new ideas, but in escaping the old ones”. Darwin said he had to write down new ideas constantly, otherwise his subconscious would wipe them out and revert to old beliefs.
Stockholders should think and behave like owners. There are three main important questions that shareholder in public company should focus: (1) do the company have right CEO? (2) Does he/she overreact? (3) And is he/she too focused on acquisitions or empire building and stop thinking on a per share basis?
The key questions when evaluating management of a potential acquisition target is “do they love money or the business”. Buffett compared “You spent all your life painting this painting. You can sell it to us and see it hanging in a place of honor in a museum. Or you can sell it to an LBO operator and see it hanging in a porn shop”.
On probability thinking, the decision he made based on probability and not the guesswork. He tries to think through every decision that comes to him. Some decisions are simple probabilities. However, he added that we were all human and probabilistic thinking is not always possible (such as decision to fire people)
The full speech is here: http://www.tilsonfunds.com/BuffettWhartonspeech.pdf
He doesn’t like to lose money. Capitalism is very brutal. The problem is not about lacking opportunities, it is the prices.
The reason Buffett wounded up his partnership in 1969 because he saw in that year it was tough. He had grown from $105,000 to $100,000,000. He won’t persist in trying to make money when he doesn’t understand what’s going on. It’s harder to invest and risk other people’s money than to invest your own money.
Investing is totally different game from other businesses, such as department store. Department store is the business that throws defensive decisions at the owner all the time. But in investing, just need to sit and wait for the right pitch.
In investment, he can recognize a 98 or 6, not a 63. He really tries to buy wonderful businesses at ridiculous prices. For Washington Post, the whole company was sold for $80 millions in 1973. Most analysts would have agreed that the intrinsic value of total assets would be worth around $400 to $500 millions.
To determine the value of $1 received one year from now, it depends on how much purchasing power $1 dollar has in a year. One needs to find the present value of that $1 dollar, using discount rate (i.e Treasury of equivalent maturity). It is similar to analyzing the stream of company’s earning flow. Besides, investor needs to be aware of the change in medium to long term rate.
The easiest person in the world to fool is yourself. People believe what they want to believe. Everyone rationalizes their actions. And according to Keynes “The difficulty lies, not in the new ideas, but in escaping the old ones”. Darwin said he had to write down new ideas constantly, otherwise his subconscious would wipe them out and revert to old beliefs.
Stockholders should think and behave like owners. There are three main important questions that shareholder in public company should focus: (1) do the company have right CEO? (2) Does he/she overreact? (3) And is he/she too focused on acquisitions or empire building and stop thinking on a per share basis?
The key questions when evaluating management of a potential acquisition target is “do they love money or the business”. Buffett compared “You spent all your life painting this painting. You can sell it to us and see it hanging in a place of honor in a museum. Or you can sell it to an LBO operator and see it hanging in a porn shop”.
On probability thinking, the decision he made based on probability and not the guesswork. He tries to think through every decision that comes to him. Some decisions are simple probabilities. However, he added that we were all human and probabilistic thinking is not always possible (such as decision to fire people)
The full speech is here: http://www.tilsonfunds.com/BuffettWhartonspeech.pdf
