Warren Buffett Q & A at Wharton
- URL (PDF)
- Warren Buffett replies to 17 questions, on a variety of things, put forth by Wharton students in Nov 2004. Looks like much (all?) of it was taken down from memory after the actual session(s). The replies have the usual Buffettesque ring to them, with wit and wisdom thrown in in his typical fashion. Plus the occasional surprising revelation about his way of thinking about investing.
- Take-homes(first reading):
- Quick changes in business are an enemy of investment. Predicting the future of a company that is changing quickly is risky, and investment decisions based on such predictions have historically gone hugely wrong . Therefore, it is better to look for the absence of (quick) change in companies,and to go for companies that have been stable over time. Instead of looking to predict change, look for predictable demand.
"If you can identify change, that is great, but it is a lot more risky and so is the chance of your strategy not working."
- The idea is to be able to recognize extremes of valuation. Small mismatches in value and price are not significant, nor is the ability to spot these.
- Once in a while the stock market does not price companies rationally, and at these times wonderful businesses can be bought at ridiculous prices. He quotes the example of Berkshire Hathaway(BH)'s 1973 purchase of Washington Post shares. The entire company, in the form of its shares, was available in the market at that time for $80M, while most analysts would have agreed that the company's assets were worth $400M to $500M. The institutional investors from whom BH bought shares of the company wouldn't have argued this valuation, but at the same time they couldn't sell the shares fast enough because they thought the share prices would keep falling.
"The market is like an auction, and stocks traded on it are not perceived as ownership shares in business."