It is well known that investors from every corner of the globe will want to attend the annual meeting of Berkshire Hathaway. They want to catch a glimpse of Warren Buffett, the investment legend who will share his wisdom with his shareholders. This year is of no different with 31,000 attending the meeting in Ohama, USA on 4th May 08.
I'd read some reports about this AGM and I want to share some of the wisdom that I'd learnt from him.
When asked about the economy. He replied:
"I haven't the faintest idea, We never talk about it, it never comes up in our board meetings or other discussions. We're not in the business of economic forecasting, we don't know how to be in that business."
His point is simple: As an investor, we don't need to predict the economic cycle. Instead, we should focus on evaluating individual businesses. We should look beyond stock prices to analyse whether the underlying business can continue to grow but can pay special attention to whether customers would continue to want a company's goods and services.
Several people claims to heard him privately about his take in the economy.
He believes that, while the odds of a financial panic are much lower, the financial pain has a long time to run. Buffett does not believe recovery is around the corner at all. And he continues to regard most major financial stocks, because of their enormous expousure to subprime loans and derivatives, as impossible to value accurately or confidently.
When asked about how to invest successfully
"You have to have the right temperament. I tell the students who come visit me that if you have more than 120 or 130 I.Q points, you can afford to give the rest away. You don't need extraordinary intelligence to succeed as an investor. You need a philosophy and the abiity to think independently. It doesn't make any difference what other people think of a stock. What matters is whether you know enough to evaluate the business."
His point is: We need to detach our emotions from other people's behaviour. The key is not to be seduced by crazy ideas, but stick to fundamentals year after year.
When asked on the formulas they used to predict stocks
"Academia doesn't get too interested in us, we are too simple. What would the professors do? A great man of the formulas[they use to analyse securities and market] are dead wrong. They exist purely to give the intellectual class something to do."
His point is: Keep the analysis simple.
About investor and speculator
"Most people emotions work backwards: They get greedy when stock prices go up and fearful when they go down. Instead, if you are a true investor, you should shop for stocks the same way you shop for anything else: Look for sale prices and never regard falling prices as inherently bad news. Instead falling prices create the opportunity to buy even more of something that was already worth owning.
His point is: An investor like Buffett, wants the price of a stock to fall below the value of its underlying businesses so that he can buy even more and hold for as long as possible. A speculator only wants the price of a stock to go up, with no regard for the value of the underlying businesses as all, so he can sell as fast as possible.
To the investor, the market's opinions do not matter. to the speculator, they are the only thing that matters.
His analogy of market downturns
"We don't predict stock prices, all we know is, the lower they go, the more interesting they get. I think it was Agatha Christie, who was married to an archeologist, who said:"I don't mind getting older, because the older I get, the more interested my husband becomes in me."
Advantage of being old
"At an average age of 80, we are growing older at a rate of 1.25%. Its a lot better than those younger than us"
(Above are just some excerpt from various internet articles I read from CNNmoney.com)
1 comment:
"When asked about the economy. He replied:
"I haven't the faintest idea, We never talk about it, it never comes up in our board meetings or other discussions. We're not in the business of economic forecasting, we don't know how to be in that business.""
I thought he is the one who said US is already in recession some months back. Isn't he the guy who said Singapore has made a bad mistake and that CITIbank should be bought at five dollars?
Post a Comment