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Warren Buffett MBA Talk at University of Florida – Part 5: The Procter & Gamble, The Walt Disney Company, Berkshire Hathaway Inc, Fannie Mae and US Airways Group Inc. [Videos]

Karl

Karl

8 followers
Warren Buffett gave a talk to MBA students at The University of Florida in 1998. This article is the final part of a 5 part series on the videos. Included in this article are take aways from his talk.

If you have not already read the articles from the beginning, I recommend doing so starting with part 1. In these articles, Warren Buffet discussed McDonald's Corporation, The Coca-Cola Company, The Procter & Gamble Company, The Walt Disney Company, DreamWorks Animation SKG Inc, Berkshire Hathaway Inc, Fannie Mae and US Airways Group Inc.

Part 1 can be found here:

http://www.gurufocus.com/news.php?id=69071

Part 2 can be found here:

http://www.gurufocus.com/news.php?id=69249

Part 3 can be found here:

http://www.gurufocus.com/news.php?id=69640

Part 4 can be found here:

http://www.gurufocus.com/news.php?id=69941


Video 10



Q-19: garbled in the video, but it is in relation to where things are going in the short and long term.

A: Of course, he has no idea where the markets are going. Unfortunately, the markets don’t know his feelings. This is one of the first things an investor needs to learn. That the markets don’t always agree with your sentiment. “The stock does not know the owner.” The markets essentially give the investor the cold shoulder.

Psychologically you want the stocks to go up, but in reality you want them to go down. This is what chapter 8 of Ben Grahams “Security Analysis” talks about. You only want stocks to go up when you are no longer saving and instead spending. That’s the only time you should care about higher prices. The later prices go up, the better. When prices go down, you should look harder to find opportunity.

Buffet specifically states chapters 8 and chapter 20 as the two most important essays ever written on investing. Chapter 8 discusses the attitude towards stock market fluctuations. You want prices to go up, but in actuality, you want them to go down. Chapter 20 discusses margin of safety.

The stock exchange is like a big supermarket that sells companies and you want to buy for less, not more. You don’t get excited after seeing a new high for a can of Coke after all. Simply put, if you are going to be a net buyer, you want lower prices. If you are going to be a net seller, you want higher prices. It’s as simple as that.


Q-20: What would you do I you could relive your life?

A: This is great. This is why Warren is so loved. He doesn’t care that he is rich. He realizes that he was born in the right place at the right time.

He goes on to say that if it was 24 hours before you were born and a genie came to you and said that you have to design the world you live in, what would you do? There is a catch. You don’t know your circumstances till you are born. You will not know your race. Where you are born. Blind or deaf. Etc. You would design something that does not leave those that are less able to be behind.

Furthermore, Warren Buffett states that he was born to be good at allocating capital. If he landed on a desert island, the question is “who can raise rice efficiently?” That is a valuable commodity there. A few million years ago, Warren said that he would be some animal’s lunch. He admits that he is lucky to be born when and where he was. He admits to be lucky to be wired in a way that a market economy pays off for him.

He wants to enjoy life and work with those he likes. He’d rather be poor and happy then rich and unhappy. He wants to associate with people he likes.

I highly recommend people listen to his answer to this question. It begins at the 2:40 mark of the video. It is as good as of a thesis on how to look at your life as I have ever come across.

To answer the initial question, he wouldn’t change a thing. He jokingly says that he wouldn’t have bought US Air, and this ends the Q&A session.


Conclusion:

These are videos I have watched many times in the past. Some say that they read Security Analysis and The Intelligent Investor once a year. I view these videos as being in that league. I have watched them more than once in the past and watching them while taking notes has been a true learning experience. This is one of the most amazing glimpses into Warren Buffett’s brain that I have ever come across. Some pay hundreds of thousands and even millions every year to have lunch with Warren Buffett in a charity event. This is the next best thing, but for free. If you feel compelled, give some money to The Glide Foundation(http://www.glide.org/) in thanks to Warren Buffett for being so open about his investment philosophy.

I highly recommend that you not only watch these videos, but study them. What should be learned from his MBA talk is not what he said about he companies, but why he said those things. By focusing on this, you can gain a better understanding as to what it takes to become a better investor.

He spoke of Disney and its moat. An investor needs to think in terms of the customers and longevity using this example. So long as parents will view the company to be one that produces products which are safe for their child, Disney will sell more than competitors and be able to charge a premium. That translates into better profit margins and more revenues than the competition. On top of this, they have a catalogue of characters that about a century old from which they can produce income. He also discusses how DreamWorks Animation SKG is attempting to penetrate Disney.

In terms of Coke, anyone could have learned as to why Coke is a wonderful company through the review of these videos. Much of what Buffett said about Coke is still relevant today. Warren essentially provided his thesis on Coke throughout the videos.

He also mentioned some of Berkshires private holdings such as See’s Candy and Geico. He went as far as stating why he loved the companies and what exactly is so wonderful about them. See’s Candy had pricing power (the headroom to raise prices) when it was purchased and customers that loved their product. Geico is a low cost provider of insurance.



He spoke about how Fuji penetrated Kodak’s market as an example of a company that was asleep behind the wheel for only a short period of time. And that is all it took.

He also spoke of his experiences with Fannie Mae and US Airways Group Inc. And also mentions Proctor and Gamble.

If you have not already read all parts of this review, please do so. Much more detail is provided in those articles. Pay attention to why he invests in things and not what he invests in and anyone can learn some important lessons about proper capital allocation. Links to parts 1 through 4 are provided below:


Recap:

Part 1 can be found here:

http://www.gurufocus.com/news.php?id=69071

Part 2 can be found here:

http://www.gurufocus.com/news.php?id=69249

Part 3 can be found here:

http://www.gurufocus.com/news.php?id=69640

Part 4 can be found here:

http://www.gurufocus.com/news.php?id=69941



About the author:

Karl
Karl is currently a software engineer in Connecticut with a bachelors of science in electrical engineering from Clarkson University. He has been investing since 2001 and interested in value investing since 2005. Karl is continually striving to learn more about investment.

Rating: 3.3/5 (8 votes)

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