On investing…

warren buffett Mr Buffett the Teacher Executives
warren buffett

How Warren spends his day:

  •  Wakes up at 6:45, reads paper at home, often doesn’t make it into the office until after the market opens
  • No set schedule, WB hates having a full calendar
  • Always takes reading material home
  • Spends 80% of the day reading, 20% talking on the phone (he then said it might be more like 90/10)
  • Phone conversations are generally short

Investment process:

  •  In the past some things were cheap enough WB could decide in a day (this was somewhat a function of a time period where companies would sell at 2-3x earnings)
  • Decisions should be obvious to onlookers. You should be able to explain why you bought  something in a paragraph.
  • “I don’t do DCF” (WB says he does a rough approximation in his mind)
  • Finding ideas is a function of cumulative knowledge over time. Something just comes along usually an event takes place, like a good management team screwing up – that creates the opportunity (WB seems to imply here that his reading isn’t specifically targeted at finding ideas, but rather that ideas jump out at him as a natural consequence of vociferous reading)
  • You must be patient…good ideas tend to be clustered together, and may not come at even time intervals…when you don’t find anything for a while it can be irritating
  • WB isn’t bothered by missing something outside his circle of competence
  • Missing things inside the circle is nerve racking…examples include WMT, FNM

Advice for new investors:

  • Don’t worry too much about your mistakes
  • Don’t learn too much from your mistakes

o Don’t become Mark Twain’s frog that never sat again on a stove after being burned
o BUT…never be willing to play a “fatal” game

  • Don’t confuse social progress with the chance to make money – look at airlines and autos for examples
  • Law degree is not essential, but good if you think it will help in your specific career
  • Learning to think like a lawyer is a valuable trait
  • Allocate even more of your day to reading than he does
  • Read lots of K’s and Q’s – there are no good substitutes for these
  • Read every page
  • Ask business managers the following question: “If you could buy the stock of one of your competitors, which one would you buy? If you could short, which one would you short?”
  • Always read source (primary) data rather than secondary data
  • If you are interested in one company, get reports for competitors. “You must act like you are actually going into that business, and if you were, you’d want to know what your competitors were doing.”

See Full PDF here: BuffettVanderbiltnotes

Via: tilsonfunds