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Warren Buffett Speaks to Becky Quick - Stocks Fairly Valued

September 19, 2013 | About:

Comments

AlbertaSunwapta
AlbertaSunwapta - 1 year ago
Tongue-in-cheek... Buffett is a "value investor" and so runs a concentrated portfolio, where only micro not macro forecasting can be performed and so the qualifier should be that a few stocks are fairly valued, and that, based only on Buffett's 'circle of competence'.

Of course we all know that Buffett doesn't forecast where the market will go short-term, but he does project future expected returns for the entire market and thus his circle of competence does include the aggregate market in terms of the core variables driving future aggregate earnings and aggregate returns.

This seems to be at odds with many "value investors" preference if not ideology of looking only at individual companies and not concerning themselves at all with the 'noise of the market'.

I'd love to hear what others do and what they think about what I do. Personally, I invest in both index funds/ETFs and individual stocks so, rightly or wrongly, I pay attention to market return prognostications and value statements from guys like a Buffett, Grantham, Klarman, Hussman, Siegel, Chanos, et. al. in order to understand potential threats on the landscape to my index positions. (Eg. The possibility of interest rates rising or staying flat over the next three to five years.) When it comes to my individual positions I only let the macro perspective temper my moves in some sectors or into marginal positions. (Eg commodity reliant businesses, those with large re-financing risk, etc.). Doing so has only been marginally successful though it has protected my downside on several occasions. (Today's situation is somewhat akin to selling when a stock reaches intrinsic value. As of mid May, I'm now out of most of my index positions
vgm
Vgm - 1 year ago
Thanks Holly.

Always a privilege to get Buffett's thoughts on the market. A sentence or two from him each five or so years is all that's needed - and worth its weight in gold. (Sorry, Warren, I know you don't like gold ;-)

He told us to "Buy American. I am" five years ago. Now he reminds us that stocks were "ridiculously cheap" at that time. For those of us who followed, it's been bonanza time.

Of late after the huge bullrun, it's been relatively clear that the equity markets were getting close to fairly valued, but there's been debate about whether they were overextended or not. He believes they are not - exactly in line with Howard Marks' comments a couple of weeks ago on CNBC, as well as an insightful piece by Paul Price here on GF, also recently. (That's not to say that there aren't some under- or over-valued individual stocks. There will always be some such.)

Buffett's few (and admittedly qualitative) words are true north. For me it's a celebration when he speaks.

"I'd rather be roughly right than precisely wrong."

"Some people in life like to make simple things complex."

Buffett

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