The more I read the book and keep up with the current financial news, the more impressed I am with Warren Buffett. In the current banking turmoil, Wells Fargo has done better than expected as it is not as burdened by the subprime mortgage paper pitfall. Recently Coca-Cola registered a profitable third quarter as compared to its rival PepsiCo. Coke and WF are some of the companies Buffett has a stake in.
These two companies were also featured in the book. These two companies illustrates some of Warren Buffett's strategies which I really admire:
1. Know the companies very well; its assets and core business, its record of consistency, and favourable long term prospects - so do your research
2. Place importance on trustworthy, honest, rational, independent thinking, and exellent managers.
3. Value of the companies - whether buying at under the value or a fair price, you need to know the intrinsic value of the companies. This is where Williams' model come into practice.
And recently, he was quoted as saying, "Be fearful when others are greedy, and be greedy when others are fearful" and advising people to buy stocks now. The editorial in the Financial Times (dated 21/10/08) said that it is not so easy for investors to follow as they are not sure when is the lowest.
However, if you were to follow the book, Buffett does not just buy indiscriminately but buys undervalued companies at bargain prices. Even if the prices were to go lower, it will not matter as much as he believes that these undervalued companies will sooner or later realise their actual values. Also, since he invests mostly long term, the subsequent returns over the long term will not be much different.
Of course, the editorial comment had a point, which is why I especially liked Bloomberg's advice following Buffett's. He mentioned that for small investors, best to invest in mutual funds and do it over certain period of time. For example, say do it monthly over a period of six months. Your investment would most likely have an averaging effect.
No comments:
Post a Comment