Let's discuss: Warren Buffett

[Vox Populi Vox Dei]

So everyone should know who Warren Buffet is...

Anyway my question is this: Why don't all investors use his investment philosophy of 'value investing' and make money off the stock markets? Is it perhaps due to our instant gratification culture?

I do know that some things he did way back then are not allowed today due to regulatory changes, but surely if everyone followed his philosophy, they would make money?

 

[ponder]

Quite an interesting toppie that. You would expect someone with his wealth to be living large but he lives in a modest house and drives a second hand car.

I like the old bullet based on what I've seen in a documentary about him.

 

[guest2013-1]

Is he the inventor of the all you can eat buffet? because if he is THE MAN IS A GENIUS

 

[jambai]

good question and quite simple answer.We dont have his amount of money to become material and well known like the next warren buffet.There are traders out there that possibly perform better absolutely over certain market trends but few have his record.His strategy is simple,but implementation is more difficult than it looks as patience is one of his strengths. I would say to any asset manager eg Coronation.How many people do you employ and how come you still cant outperform buffet or do what he does?

 

[AlmightyBender]

Well understanding value investing is simple, but actully deciding which investments qualify for "value investing" is another matter entirely. There is a lot of skill, knowledge and experience that goes into that.

 

[Hamish McPanji]

I try and use his methods for selecting shares, but as for how he goes about things in reality, you can't match that.

He buys whole companies, owns a few insurance companies that generate plenty of cash, etc.
The small investor can't do that.

I think that is the key. He can turn the fortunes and operations of the company when he invests. He builds the value of his investments over the long term Most of us will not have enough shares to change the direction of the company,or the patience.

So you are hoping that the major shareholders have their sh*t together, otherwise you will lose or jump ship.

What amazes me about him is that he one of the first members of the Giving Pledge: http://givingpledge.org/
So he has given his kids a few billion each, and pledged like more than 90% of his wealth to charity
To be honest with you, if i was as rich as him, i dont know if i would be in the state of mind to able to do the same. My money will likely go to my harem and their (and my) kids

 

[supersunbird]

So everyone should know who Warren Buffet is...

Anyway my question is this: Why don't all investors use his investment philosophy of 'value investing' and make money off the stock markets? Is it perhaps due to our instant gratification culture?

I do know that some things he did way back then are not allowed today due to regulatory changes, but surely if everyone followed his philosophy, they would make money?

That bolded part is a bit unclear: just by investing in any stock market activity (a unit trust or EFT with a equity component) you are attempting to make money of the stock market (just might not be via value investing). And if all investors followed value investing then by not following that you would have more oppurtunities to make money by not following the herd.

And I read that Buffett has said that most people will be better off investing in index funds. And if investing then it is by default a longer term thing (in my mind 2 years or more) so don't see how instant gratification comes into it...

 

[matt_za]

In my opinion he is a good investor but a brilliant manager. Most of his investments that make up his holdings are way back and through his management the teams running the companies are consistently providing good returns. He himself even admits now that the 2 investors he is training up have beat him in terms of performance over the last 2 years but i believe its his management style that has allowed him to amass his fortune.

 

[jambai]

In my opinion he is a good investor but a brilliant manager. Most of his investments that make up his holdings are way back and through his management the teams running the companies are consistently providing good returns. He himself even admits now that the 2 investors he is training up have beat him in terms of performance over the last 2 years but i believe its his management style that has allowed him to amass his fortune.

Yes agree.Buffet always knows when to strike regards to deals.He seems to have his timing right for very strong companies.He would possibly be interested in example SAB if it ticks all his boxes that he has built up over time,but only at the right time and price.Man on the street might think SAB is a good value investment but cant wait for the right time ,like buffet could

Another thing is Buffet has the charm to negotiate good favourable deals example Goldman sachs deal .So not all his deals are done by him buying up shares on the open market

 

[Cius]

Also I could be wrong but I recall that Buffet made a lot of his money off taking a fee when investing other people's money. If I invest like him I will probably retire OK but not be worth 1% of his portfolio. He made tons out of doing what he did for many people and taking a small management fee off of billions and grew from there. Hence to do well with your own money learn how to invest like him. To be as rich as him you need to persuade other people to let you look after their money and then take a cut which is very hard to do.

 

[InvisibleJim]

I think the key point about value investing is that you are trying to buy good companies at bargain prices and you would (only) sell at a point where the company is overvalued by the market and probably that other criteria were unfavourable (eg. poor management or performance.) The key skill and effort that Bufffet has built is in assessing value of stocks.

Benjamin Graham wrote a great deal about speculating versus investing. By Graham's reckoning, speculation is more akin to gambling and tends to be based on a particular market outcome. Investing is a more considered approach that (almost) eliminates risk. Speculation has its place so long as you know you are speculating, understand the risks and accept them but it is investing that Graham pioneered and Buffet has refined. Many people's perception of what is investing in the stock market is actually speculation. I doubt you would see Buffet investing in Facebook or for instance in our beloved Telkom as I don't think these stocks would likely meet selection criteria for a value investor.

I take a lot of the books written about Buffet with a pinch of salt. Unfortunately he hasn't been as generous as his mentor in terms of sharing the secrets of his success.

 

[Hendrix]

I have a lot of respect for him, A lot of what he professes is common sense, but few people can do it.
Buy when there's blood on the streets... Sell when everyone's greedy.

I don't think he's someone who panics easily!

 

[InvisibleJim]

Impulse buying and panic selling don't come in to it for a value investor. His decisions are based on his own valuation of a company compared to whether the market undervalues or overvalues the stock not on the actual day to day price of the stock.

This isn't as straightforward as taking a contrary position on a stock. A stock that is cheap does not necessarily represent good value. For instance a company whose stock price has plummeted to a historical low but which has recently written off large amounts on failed investments, has a new and unproven management team, has had much instability in management over several years, has paid low or no dividend recently and is subject to an unpredictable level of government or regulatory interference might be considered a risky prospect by a value investor even though it is cheap.