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Baseball and investing words of wisdom

January 01, 2006
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by Charles Mizrahi

At the turn of the 20th century, Willie "Wee Willie" Keeler was one of baseball's greats. By the time his playing days were over, Keeler had two batting titles and eight straight years of 200 or more hits. He also produced 13 straight seasons batting over .300 and a career mark of .345. He is mainly remembered for his amazing 44-game hitting streak in 1897, a record not broken until 1941 by Joe DiMaggio. As the story goes, he was once asked for the secret of what made him such a great hitter. He replied: "I keep my eyes clear and I hit 'em where they ain't."Some time after Keeler was sharing the secrets of his success on the playing field, financier Bernard Baruch shared his regarding investments. He responded: "Buy straw hats in winter, for in the spring, they will surely sell!"

As investors we can learn much about investing from these two men. Keeler and Baruch both achieved success in different professions, but both credited their success to very simple formulas. Keeler basically tried to hit the ball to places where fielders were not playing. By keeping his eyes clear, he waited for a pitch, which gave offered him the highest probability for success and then hit the ball to a place least expected.

Baruch achieved success going against the grain. He was willing to take an early position on something that had a high probability of success and then had the patience to wait. Buying things when they are out of style or not fashionable is very logical to talk about, but for many it's very difficult to put into practice. The Oracle of Omaha, Warren Buffett, is a study in how to combine the quotes of both Keeler and Baruch to achieve enormous success. Buffett always has his "eyes clear," waiting for the markets to give him an opportunity, and he often leaves many people scratching their heads, trying to figure out why he did what he did. Although in time his strategies become obvious, it often takes months or years to see the results of his actions.

About two months ago, Buffett announced that the next big thing was the energy sector. He wasn't talking about oil but electricity-big power generators. On May 25, for $9 billion, he bought PacifiCorp, a major utility that provides electricity to the northwestern part of the United States. Since then, many parts of the country have been suffering through a heat wave, with temperatures in some areas breaking the 100-degree mark. Guess what industry is now going like gangbusters, supplying the electricity for all those air conditioners? You guessed it, electric utility companies.

I'm not suggesting that Buffett is investing based on weather patterns over the short term, but the reason behind what he is investing in today usually becomes a whole lot clearer in hindsight. His latest stock purchase, Anheuser-Busch (which has fallen since he announced his purchase), has many of the characteristics of Coca-Cola, a stock he purchased back in the late 1980s. Coke was losing market share, competitors were closing in, and it was said the company had no more room for growth. The stock was considered a has-been and was trading at very cheap levels. The Anheuser-Busch story of today has all the same negatives that Coke had close to two decades ago. What Buffett saw that most investors discounted back in 1988 when he was buying Coke was the company's amazing brand value and its overseas penetration, which was just getting into high gear. From what I see today, it appears that the same Coke story now applies to a different beverage company, Anheuser-Busch.

"Hit 'em where they ain't" and "Buy straw hats in winter" are two pieces of important investment advice that should not be overlooked when investing in companies, and they are two things that nobody does better than Warren Buffett.

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Charles Mizrahi is editor and publisher of Hidden Values Alert newsletter, which focuses on finding stocks trading significantly lower than their underlying business value.  He has over 23 years experience in the financial world as a money manager and investor. Email: charlesmizrahi@gmail.com, Webpage: www.HiddenValuesAlert.com


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