Forum Archive Index - August 2003

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi Macdunk,
 
>
> If we copy his Investment strategies will It work In our market?.
>

We won't get it right on every transaction.   But choose a suitable basket 
of shares and take a longer term outlook and I would say 'yes'.

>
>Warren has the advantage of  getting his bum on the 
>board.        He has the advantage of Insider
> knowledge, the ability to manipulate companies, trade 
>one off against  the other, buy and sell companies the 
>same way macdunk would buy a new shirt.
>
><snip>
>
>Warren has a very big downside, he is too big to move
> fast.     It would distort the market he has to grin and take It.
>He can't run for cover.  Even if the market  collapses,
> he cant move.
>

So which is it?   Does he buy and sell shares like you and I might do 
with shirts, or is he paralysed- forced to wear the same shirt for years.

>
>  I have every respect for buying the Warren way, but my 
> selling strategy which accounts for fifty pc of my Investment 
> transactions is far removed from what Warren would get up to.
> 

Brian McNiven's book "A Wonderful Company at a Fair Price" discusses 
the reasons why Warren is often loathe to sell.  These are:

1/ Capital Gains Tax Crystallisation:  (does not apply to investors here).
2/ Management:  Because companies with excellent management are 
few and far between, Buffett is wary of the risk in switching allegience to 
people less well known to him.
3/ Fear of not being able to buy back at a better price.

I think those last two reasons are legitimate in the New Zealand market.

>
>There are some Investors that get to Impressed with the 
>advantages that warren has along with buying style, that they
>continue on and take aboard the disadvantages of an Investor
> as big as warren.        
>

Is not selling a company because you know the management well a 
disadvantage?

Is not selling because you may not be able to buy back in at an 
advantageous price a disadvantage?

>
>The average Investor Can be more flexible than warren
> nip In and out take the cream and leave the whey with
> very little risk.    
>

...if you are lucky.

The other way of looking at this process is what fund manager Peter 
Lynch describes as:
"cutting the flowers and watering the weeds."  
In other words it is not always easy to sell the right shares without the 
benefit of hindsight.

Warren doesn't tend to buy companies where there is any 'whey', 
anyway.

>
> The average  Investor Is therefore In a better position
> than warren to make a bigger percentage on there money
>

Certainly small size gives 'us' the ability to make good money out of 
share investments that would be too small to be of any interest to 
Warren.

>
>  so why limit ourselves with his
> handicaps when we don't have them to start with.   It takes a five min
> phone call to get your money out and start again that Is a massive
> advantage over warren he Is stuck with It  and has to ride It out.
>

>From the reference I quoted above:

"Warren Buffett said something to this effect.   Every time you buy a 
stock, consider the purchase as you would if it was going to be the only 
stock you will ever own for the rest of your life.  If that were truly the 
case then you would want to make darn sure it was a pretty sound 
investment."

In other words being 'stuck with it' is unlikely to be a problem.

SNOOPY

--
Message sent by Snoopy 
on Pegasus Mail version 4.02
----------------------------------
"You can tell me I'm wrong twice, 
but that still only makes me wrong once."


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