By Seeking Delta of http://seekingdelta.wordpress.com
Yesterday I had the privilege of attending a talk by Jeff Matthews. Jeff runs his own hedge fund, is the author of Pilgrimage to Warren Buffett’s Omaha and also maintains a very entertaining blog (Jeff Matthews Is Not Making This Up). Jeff was nice enough to provide copies of his book to the first 40 registrants, of which, unfortunately, I was not one. Therefore, I have yet to have a look at the book but I must say if it is anywhere near as entertaining and full of insight into Buffett and Berkshire as his talk, I would recommend reading. I know I will be.
Jeff shared a few interesting items from his career and his experience following Buffett. I have read my fair share about Buffett but Jeff shared some very interesting facts and conclusions that he has drawn over the years. Here is a recap of what I found to be the most interesting and insightful.
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The debate over active versus passive management continues as trends show the ongoing shift from active into passive funds. Q2 2020 hedge fund letters, conferences and more At the Morningstar Investment Conference, Michael Mauboussin of Counterpoint Global argued that the rise of index funds has made it more difficult to be an active manager. Drawing Read More
Mr. Matthews started his career as an analyst covering the Oil and Gas sector in the seventies; the sector was booming at the time. It seemed that everyone wanted to own oil and commodity related investments at the time until one day Jeff came across a person that was interested in boring ‘ole General Foods. This investor had a different way of looking at the company, stating its key asset was ‘shelf space’. Of course, commodity stocks crashes after the Hunt brothers failed in their attempt to corner the silver market and this investor went on to a nice return on his General Food investment. This investor, of course, was Warren Buffett and this was the beginning of Jeff’s interest in the Oracle.
My key takeaway: Fight the urge to extrapolate recent trends into infinity and seek out contrary ideas and sources of value.
According to Jeff, Buffett is fairly easy to understand (not to say he is a simple man). To understand Buffett, Jeff recommends reading / attending the following:
- Owner’s Manual – Buffett’s 15 point outline on Owner-Related Business Principles
- Buffett’s Annual Letters – See The Essays of Warren Buffett: Lessons for Corporate America for a nice summary
- The Annual meeting – See Jeff’s book for more detail.
Berkshire is four things:
- Buffett and his personality
- Charlie Munger
- The actual business themselves (See’s candies, GEICO, Benjamin Moore, etc.)
- and the Shareholders. Buffett has recruited quality owners with a long-term focus
According to Jeff, neither Buffett nor Munger can be completely replaced but they have built a solid portfolio of companies that even with decent management Berkshire will be a nice legacy for Buffett.
On the choice of Todd Combs as Buffett’s successor: Jeff thought Todd had a few things going for him. 1) He has a background in insurance which Buffett liked. 2) He made money in 2008. This appealed to Buffett’s focus on risk and is congruent with Warren’s own track record; having only two down years in his career. This set Todd apart from other more famous investors that were rumored to be in the running.
Lastly, the most entertaining insights came from questions asked in the annual meeting (a.k.a. Woodstock of Capitalists). When asked by a seventeen year (old attending for the 10th time!), how can I be a great investor? Warren answered, “Read everything you can. If it turns you on it will probably work for you.” According to Munger, “Ask what do you own and why do you own it. If you can’t answer that question you are not an investor.”
I found Jeff’s talk to be very entertaining and insightful. I look forward to reading A Pilgrimage to Warren Buffett’s Omaha for more insightful detail into Warren Buffett and Berkshire.