Value Investing

Many Lessons From Omaha

If there was one thing I learnt from my recent trip to Omaha, Nebraska (and let me tell you: I learnt a lot), it’s that you don’t have to be hunkered down in a glittering marble office in Wall Street to be a successful investor.

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Warren BuffettWe all recognize Buffett and Munger as the Kings of the Game. Fifty years plus of successful investing has earned them the right to the crown. And they deserve it. Absolutely, without a doubt. And there they were, sitting comfortably and humbly before 20,000 adoring shareholders in one of the smaller towns in America's mid-west - Omaha, Nebraska. Which, if you don't know, is nowhere near Wall Street. In fact, Omaha is the polar opposite in may ways; a small population and very, very quiet.

So why would the best investors in the world decide to grow roots in a place as divorced from Wall Street as you can get?

The answer is that the world's best investors are Independent Thinkers.

 “The consensus is often wrong, so I have to be an independent thinker. To make any money, you have to be right when they’re wrong.” Ray Dalio

"You can’t be a good value investor without being an independent thinker – you’re seeing valuations that the market is not appreciating." Joel Greenblatt

“Great investing requires an independent spirit, and the courage to acquire assets the crowd disdains.”  Shelby Davis

Locating miles away from the noise of Wall Street allows Buffett to focus on what's important. Rather than obsess over geopolitical developments, economist's forecasts, interest rates, or the Fed's next move, instead Buffett focuses on the businesses as an owner would. He spends most of his day reading and thinking. Buffett only considers businesses he understands, scrutinizing how sustainable their competitive advantages are, the quality of the management and their ability to deploy capital. He reads the raw financial statements, he talks to industry representatives and he collects the facts. Ultimately he's looking for wonderful businesses that can deliver more long-term value than the money than he puts in. It requires patience and discipline.

Like most great investors, Buffett is also somewhat of a contrarian. But not just for the sake of it; only when he has conviction. Basically speaking, if you do what everyone else does, you'll deliver average results. And remember, the average fund fails to beat the market over the long term.

Over the years I've noticed quite a lot of the world's best investors locate themselves away from the noise of Wall Street. I had the good fortune to speak with Chuck Akre while in Omaha and he reiterated his views on working well away from the distractions of Manhattan. Like Warren and Charlie, he prefers to do his thinking in a quieter place.

“The reason we are in a town with one traffic light and away from all the very bright and intellectually interesting people is that their stuff would be intellectually appealing to us and it would distract us from what it is we do well.  And that’s a really important notion.” Chuck Akre

“If I was on Wall Street I’d probably be a lot poorer. You get overstimulated on Wall Street. You hear lots of things. You may shorten your focus and a short focus is not conducive to long profits. Here I can just focus on what businesses are worth. I don’t need to be in Washington to figure out what the Washington Post is worth, or be in New York to figure out what some other company is worth. Here I can just focus on what businesses are worth.” Warren Buffett

“We’ve found for the 22 years we’ve been away from Wall Street our performance has been better than the 22 years we managed from Radio City in New York.  We went to the same meetings as the other analysts and the people who speak are so sensible that we can’t help but be influenced. It’s easier to be odd when your 1,000 miles away.” Sir John Templeton

"The advantage of being located in the foothills of the Blue Ridge Mountains is that we are outside of the fray. Removed from the noise, we are able to climb the mountain and survey the investment landscape with a rational, objective, long-term perspective." Chris Pavese

“Seth Klarman, one of the most successful investors on the planet, works out of a decidedly unflashy office in Boston, far from the intoxications of Wall Street. If he wanted, he could easily rent the top floor of a gleaming skyscraper overlooking the Charles River.. And Buffett is tucked away in Omaha’s Kiewit Plaza – another building that is not exactly known for its razzamatazz. This strikes me as a significantly, yet largely unrecognized factor in the success of these investors. Small wonder, then, that I wanted to create my own version of Omaha.” Guy Spier

In today's day and age, given the access to almost unlimited information on companies online, you don't need to be located on Wall Street to be successful. Many of the world's best sit in offices that are significantly divorced from the glitter and hype of that place and have sustained incredible track records because of it. So where are you? If you look around you and see a little less glitter and noise, dont be discouraged, in fact it might be an edge you didn't know you had!

Article by Investment Masters Class

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