With 2012 around the corner, it is time to reflect the year that was 2011 and
what I learned from Warren Buffett in 2011. While I don’t expect to learn groundbreaking stuff from Warren, every year I learn something new and over time these nuggets of gold add up and makes me a better person now and in the future.
- Be different– True to his Warren Buffett 10 Rules Jimmy John’s, “Be willing to be different” sits at #2 from the list. This year Warren took advantage of a small SEC rule that allows him to build large positions in company’s without reporting them. Throughout the year, Berkshire’s 13F filings included a small statement that said: “confidential information has been omitted” and provided separately to the SEC. It was later revealed that Warren Buffett had built up a $9 billion+ stake in IBM. Many individuals were surprised that Warren had taken such a huge stake into tech, but in my opinion Warren Buffett might look at IBM as a service company and not a tech company.
- Be persistent- There are several reports out there that highlight Warren Buffett did not decide to build a large stake in IBM overnight. Apparently, Warren Buffett has been reading IBM’s annual reports for 50 years. In those 50 years, Warren has seen how IBM has transformed itself from a tech company to worldwide IT service provider. At the same time, he has familiarized himself with with the individuals managing the company. With Warren Buffett familiarizing himself with the company, he was able to go back several years and see whether management was able to execute what they said they were going to do 5 years ago. IBM’s management has done so, and if you read their annual report they lay out step-by-step what they have planned for the future, which includes stock purchases, proper deployment of cash flow,etc.
- Always be on the hunt- Finding undervalued stocks is not easy. Given Berkshire’s portfolio size, Warren Buffett constantly has to look out for undervalued stocks. Not only that, these companies have to be large in order for the purchase to “move the needle” (have an impact on the portfolio’s returns). Just look at some of the purchases and acquisitions Warren made during 2011. Lubrizol $9 billion, IBM $9 billion+, and recently Burlington Northern $44 billion (including the stake he built up prior to acquiring it).
Looking forward to see what Warren will bring to us in 2012.
Gates Capital's ECF Value II fund was up 9.4% for the first quarter, compared to the HFRI Event-Driven Index's 8.2% gain, the Russell 2000's Value Total Return Index's 21.2% gain, and the S&P 500's 6.2% return. Q1 2021 hedge fund letters, conferences and more Gates Capital Management is an event-driven value . . . SORRY! Read More
Alex Garcia’s is a value investor and could be found by reading his blog at http://www.valueinvestinghq.com/