Reblog : Warren Buffett – “It’s Not What You Look At That Matters; It’s What You See.”


Warren Buffett provides a great lesson for all investors in the book – The Warren Buffet Way, by Robert Hagstrom. The lesson is that investors can spend weeks and years reading and analyzing information on prospective companies, but according to Buffett, “It’s not what you look at that matters; it’s what you see.” The lesson learned by Buffett happened during his investigation of IBM back in 2011.

Here’s an excerpt from the book:

Buffett confessed that he came late to the IBM party. Like Coca-Cola in 1988 and Burlington Northern Santa-Fe in 2006, he had been reading the annual reports for 50 years before his epiphany. It arrived, he said, one Saturday in March 2011. Quoting Thoreau, Buffett says, “It’s not what you look at that matters; it ’s what you see.” Buffett admitted to CNBC that he had been “hit between the eyes” by the competitive advantages IBM possesses in finding and keeping clients.

The information technology (IT) services industry is a dynamic and global industry within the technology sector, and no one is bigger in this industry than IBM. Information technology is an $800 billion-plus market that covers a broad spectrum of services broken down into four different buckets: consulting, systems integration, IT outsourcing, and business process outsourcing.

The first two, combined, contribute 52 percent of IBM ’s revenues; 32 percent comes from IT outsourcing; and 16 percent from business process outsourcing. In the consulting and systems integration space, IBM is the number-one global provider—38 percent bigger than the next competitor, Accenture. In the IT outsourcing space, IBM is also the number-one global provider—78 percent larger than the next competitor, Hewlett-Packard. In business process outsourcing, IBM is the seventh-largest provider, behind Teleperformance, Atento, Convergys, Sitel, Aegis, and Genpact.

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Reblog: Charlie Munger on Getting Rich, Wisdom, Focus, Fake Knowledge and More


“In the chronicles of American financial history,” writes David Clark in The Tao of Charlie Munger: A Compilation of Quotes from Berkshire Hathaway’s Vice Chairman on Life, Business, and the Pursuit of Wealth, “Charlie Munger will be seen as the proverbial enigma wrapped in a paradox—he is both a mystery and a contradiction at the same time.”

On one hand, Munger received an elite education and it shows: He went to Cal Tech to train as a meteorologist for the Second World War and then attended Harvard Law School and eventually opened his own law firm. That part of his success makes sense.

Yet here’s a man who never took a single course in economics, business, marketing, finance, psychology, or accounting, and managed to become one of the greatest, most admired, and most honorable businessmen of our age. He was noted by essentially all observers for the originality of his thoughts, especially about business and human behavior. You don’t learn that in law school, at Harvard or anywhere else.

Bill Gates said of him: “He is truly the broadest thinker I have ever encountered.” His business partner Warren Buffett put it another way: “He comes equipped for rationality… I would say that to try and typecast Charlie in terms of any other human that I can think of, no one would fit. He’s got his own mold.”

How does such an extreme result happen? How is such an original and unduly capable mind formed? In the case of Munger, it’s clearly a combination of unusual genetics and an unusual approach to learning and life.

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Reblog: How to Build a Warren Buffett Portfolio


Warren Buffett is recognized as the greatest investor of all-time because of his discipline and conservative approach to investing.

Instead of focusing on the short term, Warren Buffett focuses on the long term.He also has a low appetite for risk, buying companies that active traders would find boring beyond all belief.

Buffett once described his investment style as, “I’m 85% Benjamin Graham.” (Benjamin Graham is known as the godfather of value investing. His book, The Intelligent Investor, is respected as a classic on Wall Street.)

Just look at Warren Buffett’s company Berkshire Hathaway’s (BRKA) stock price appreciation over the past 20 years. And yes, you are reading that correctly, the stock currently trades for over $260,000… per share.

Berkshire currently holds a market cap of approximately $430 billion, making Warren Buffett the third richest person on the planet.

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Reblog: The Agony of High Returns


Even with a time machine, a lot of people wouldn’t want to own the best-performing stocks.

Monster Beverage (NASDAQ: MNST) was the best-performing stock from 1995 to 2015. It increased 105,000%, turning $10,000 into more than $10 million.

But this isn’t a retrospective about how you should wish you owned Monster stock. It’s almost the opposite.

The truth is that Monster has been a gut-wrenching nightmare to own over the last 20 years. It traded below its previous all-time high on 94% of days during that period. On average, its stock was 26% below its high of the previous two years. It suffered four separate drops of 50% or more. It lost more than two-thirds of its value twice, and more than three-quarters once.

That’s how the stock market works.

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Reblog: Mean Reversion and the Bell Curve


The pressure to outperform all the time leads stock pickers to constantly seek mean reversion trades

Over a three-year time period, stock prices tend to mean revert. This has spawned numerous investment approaches that try to squeeze capital gains out of those reversions. Classic deep value investing, as popularised by Benjamin Graham at Columbia Business School, taught that you would succeed by buying 50-cent dollars and selling them when and if they reverted to the mean. The “Dogs of the Dow” strategy of buying the 10 highest-yielding Dow stocks was born out of mean reversion.

Over long time periods, common stock performance falls on a bell curve like the one listed below. Half the stocks outperform and half underperform. Among the poorest performers, some go to 0%, and 5% of common stocks do so poorly that they can ruin a concentrated stock portfolio. (1)

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Reblog: Beyond Buffett: How To Build Wealth Copying 9 Other Value Stock Pickers


Santa knocks on all our doors not once, but four times a year. During his off-season, he reliably shows up bearing profitable gifts on February 14th, May 15th, August 14th and November 14th. These are the deadlines for 13-F filings with the SEC.

The “13-F” is a quarterly disclosure required of all individuals and entities who have $100 million or more invested in US equity markets. The 13-F is due within 45 days of quarter-end and lists the updated stock positions of the managers. These filings are publicly available at no charge to anyone. Websites like Dataroma make it a breeze to track the picks of various value investors. There is such a thing as a free lunch.

Non-believers will complain that buying these picks after a multi-month delay simply can’t work because markets are too efficient. Well… not so fast. A 2008 study by Professors Gerald Martin and John Puthenpurackal entitled, Imitation is the Sincerest Form of Flattery, cloned Berkshire Hathaway’s equity portfolio between 1976 and 2006 by investing in the positions with a substantial delay. Their cloned portfolio always bought (or sold) on the last trading day of the month that it was publicly disclosed that Buffett had bought a new stock or lightened up on an existing one.

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Reblog: Greatest Investors of All Time – How Did They Do It and What We Can Learn from Them


There are literally tens of millions of stock market and private investors today. The personal investing revolution has enabled anyone with a few hundred dollars to trade stocks. But we don’t have millions of great investors. Only a select few will ever be bestowed this title. So, how can you try to be one of them? You can emulate the people who were – or still are – the greatest. Below is our list of 8 of the greatest investors of all time; let us know in the comments below if you think we’ve missed out on any important names.

This list was compiled based on inputs from our members of Value Investing Clubs in UK, France, Belgium and Austria, and from our users at our FinTech company CityFALCON. Our focus at the Value Investing Clubs and CityFALCON remains on long-term fundamental investors who are looking to go through research to buy, hold and sell financial assets to generate strong higher than inflation returns.

Warren Buffett

We will just start off with the obvious case: Warren Buffett. Who doesn’t consider him one of the greatest, if not the greatest investor? Born just in time for the Depression (1930), Warren Buffett was born in Omaha, Nebraska, whence he eventually took his nickname “The Oracle of Omaha”.

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Reblog: Warren Buffett : This is the best book I read last year…


Warren Buffett’s Berkshire Hathaway is out with its annual letter to shareholders.
Near the bottom of the letter, the billionaire investor touches on his favourite reads of 2016.

“The best book I read last year was ‘Shoe Dog’ by Nike’s Phil Knight ,” he writes. “Phil is a very wise, intelligent and competitive fellow who is also a gifted storyteller.”

He adds that Omaha, Nebraska-based retailer The Bookworm will have “piles” of the book, in addition to “investment classics by Jack Bogle,” at the annual Berkshire shareholder meeting in May.

Notably, Buffett is actually briefly mentioned near the end of “Shoe Dog.”

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Reblog: Only a Market Crash Can Stop Warren Buffett From Winning This $1 Million Bet


It was a $1 million bet: Could hedge funds outperform index funds over a decade?

Warren Buffett said no in 2007. Now it looks like the billionaire investor was right.

His chosen index fund, the Vanguard 500 Index Fund Admiral Shares, climbed 66% from the start of the bet through the end of 2015, compared with a gain of 22% for a basket of hedge funds selected by asset manager Protégé Partners, including fees.

The $1 million bet with Protégé Partners ends Dec. 31. At this point, it would take a massive stock-market drop for Mr. Buffett to lose. An extended bull market and sub par performance by many hedge funds since the 2008 financial crisis have helped his case.

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Reblog: Mohnish Pabrai’s Approach To Beating The Market


Mohnish Pabrai, managing partner of Pabrai Investment Funds, speaks during the Value Investing Congress in New York. Photographer: Daniel Barry/Bloomberg News

Since inception, Mohnish Pabrai has beat the stock market by triple digit returns. What was the key to his success? Pabrai would argue nothing unexpected or surprising.  In fact, he attributes his massive success to a keen sense of cloning other super-investors like Warren Buffett and Charlie Munger. On the investing podcast, Pabrai discussed a range of topics to help explain his way of thinking and methods for achieving such strong performance.

Preston Pysh: [2:29] You have an IT background that not a lot of people know about. Would you have taken a different career path if you had found value investing first?

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