The Buffett Strategy & The Average Investor?

7 years ago, I would have liked his theory but things have happened in the industry that make me scared to have too much money in any one stock.

Its not that I am afraid that a company would have wild swing in their revenue or expenses, its more the fact that one idiot can "Enron" a company and leave an investor holding the bag.

This is a "risk" I never would have considered too heavily in the early 90's and yet I think this is a new risk that needs to be thought about when investing in only a couple of stocks.

Andy

 

That takes several idiots. Not a lot, but more than one.

 

fair point. I guess what I really meant to say was that the risks are outside of just how the business itself performs.

Andy

 

Bought Berkshire-B pre bubble burst and am up big (only wish I'd bought more). Rather than play the strategy why not let the World's best investor do it for you?

 

Tell that to Martha's shareholders.

 

Because now that everyone know's he's the world's best, he's overpriced?

 

I think that that only reemphasizes Buffett's point. Only invest in what you know. Then invest with conviction.

Buffett is old. He's chosen Lou Simpson to take over for him, but Lou only invests GEICO's investment portfolio. He's still pretty good, but he's not Buffett.

Buffett would (and has) argued that you should have uncovered many of these shenanigans before you made your investment. In fact, should only consider an investment after properly researching a company.

 

I don't think its fair to expect regular people to uncover shenanigans when many of the full time, highly paid fund managers could not even uncover them.

Andy

 

And he was old in 2000 when I bought. I'm not worried about something happening to Warren... and God forbid if something did happen I imagine I'd increase my position since the "Buffet premium" would be removed from the stock price.

 

Your right, it's not fair. But if you want to hold non-diversified equity positions (and make money) many would argue that it is necessary. Otherwise buy the index and enjoy a "safe" return.

Very few fund managers actually do or have staff do research into companies' financial statements. They are far too busy trying to mimic the S&P 500. It is not possible to look indepth into the number of positions that most mutual funds have. This is typically the realm of hedge funds.

That being said, people did find problems with Tyco, Worldcom, Enron, and Adelphia all long before the market realize it. Sixty minutes even did a couple of pieces on Worldcom. It's possible, it just requires work. A good starting point is Financial Shenanigans by Howard Schilit

 

This Bud's for you!

 

You mean... determine an actual value of the company by opening up its financial statements and doing some valuations, investigate both its and its industry's outlook, and see if you're buying something for close to what it's actually worth? Where's the fun in that?

 

http://blogs.wsj.com/moneybeat/2015/02/27/the-fate-of-the-berkshire-mill/?mod=yahoo_hs

large parts of the original Berkshire mill complex remain. The headquarters building was taken down to build more parking for the other commercial buildings, where Mr. Letendre rents out space to roughly 20 tenants and runs his own company, which he said makes “leather goods and products for the military.”
Those remaining buildings represent the majority of the square footage that Mr. Letendre acquired when he purchased the mill from Berkshire in 2000 for $215,000. There’s history in those buildings too. But they’re not for sale.

 

While Berkshire Hathaway may be overpriced, I believe it has a premium based off of Warren Buffett being in charge. In other words, when he passes away or retires I think there will be downward pressure upon the share price of A and B shares. However the Berkshire Hathaway portfolio/strategy is a pretty good one.

Whilst I don't "know" this will happen, my thought is that when Mr. Buffett does pass away or retire, let the price fall its 10% in the general scramble of investors worried about the effect on the company and then it becomes a good buying opportunity.

The only fool I've ever heard of who bought BRKA or BRKB was the one who was looking for their dividends. (this was a caller to Mad Money.......Kramer thought it was a prank and moved on)

"buy what you know" has worked for Warren Buffett and Peter Lynch. Both those guys know what they are doing.

 

report record quarterly profit on Friday because of a pretax gain of about $7 billion on a stake in Kraft Heinz Co. Buffett helped finance the merger that created the food company and Berkshire became its largest shareholder in July.

http://www.bloomberg.com/news/artic...gain-on-kraft-heinz-masks-stock-market-lapses