“When we were born, odds were 50 to 1 against us being born in the US. So we were lucky. My lump sum should go to society. There's no reason little Buffetts should be running around in 100 years rich because they were lucky.” by Warren Buffett (2003 Annual Meeting)
Knowledge grows through sharing! To be the best, learn from the best! May all your dreams come true! Collections of Value Investing articles, interviews and videos, especially on Warren Buffett and Charlie Munger and articles from various disciplines to build "Latticework of Mental Models"
Tuesday, November 29, 2005
Philanthropy
“When we were born, odds were 50 to 1 against us being born in the US. So we were lucky. My lump sum should go to society. There's no reason little Buffetts should be running around in 100 years rich because they were lucky.” by Warren Buffett (2003 Annual Meeting)
Stock Market Predictions
“It's not out of [the realm of] possibility though. You can never predict what markets will do. In Japan, a 10 year bond is yielding 5/8 of 1%. [Who could have ever imagined that?]” by Warren Buffett (2003 Annual Meeting)
Happiness and Success
“You don't want to be like to motion picture exec who had so many people at his funeral, but they were there just make sure he was dead. Or how about the guy who, at his funeral, the priest said, "Won't anyone stand up and say anything nice for the deceased?" and finally someone said, "Well, his brother was worse."” by Charlie Munger (2003 Annual Meeting)
Preparing for the future
Derivatives
“Charlie and I think that there is a low but not insignificant probability that at some time -- I don't know when; it could be three years, it could be 20 years -- derivatives could lead to a major problem. The problem grows as derivatives get more complex. We hoped to give a mild wakeup call to the financial world that there's a problem. In the energy sector, derivatives destroyed or almost destroyed institutions that shouldn't have been destroyed. [He mentioned Enron.]” by Warren Buffett (2003 Annual Meeting)
“In engineering, people have a big margin of safety. But in the financial world, people don't give a damn about safety. They let it balloon and balloon and balloon. It's aided by false accounting. I'm more pessimistic than Warren. I'll be amazed if we don't have some kind of significant blowup in next 5-10 years.” by Charlie Munger (2003 Annual Meeting)
Feedback mechanisms
"Having a good partner is key. Charlie will not accept anything I say because I say it. It's great to have a partner who will tell you when you're thinking is wrong."
"Having good feedback mechanisms is terribly important. We have a very good system." by Warren Buffett (2002 Annual Meeting)
Index funds
“In response to a question about which index funds he's recommend, Buffett replied, "Just pick a broad index like the S&P 500. Don't put your money in all at once; do it over a period of time. I recommend John Bogle's books -- any investor in funds should read them. They have all you need to know." by Warren Buffett (2002 Annual Meeting)
"One could imagine a period like Japan 13 years ago, however, in which indexing over time wouldn't work." by Charlie Munger (2002 Annual Meeting)
Shorting stocks
"It's an interesting item to study. It's ruined a lot of people. You can go broke doing it."
"You'll see way more stocks that are dramatically overvalued than dramatically undervalued. It's common for promoters to cause a stock to become valued at 5-10 times its true value, but rare to find a stock trading at 10-20% of its true value. So you might think short selling is easy, but it's not. Often stocks are overvalued because there is a promoter or a crook behind it. They can often bootstrap into value by using the shares of their overvalued stock. For example, it it's worth $10 and is trading at $100, they might be able to build value to $50. Then, Wall Street says, "Hey! Look at all that value creation!" and the game goes on. [As a short seller,] you could run out of money before the promoter runs out of ideas." (2001 Annual Meeting)
"Charlie and I have agreed on around 100 stocks over the years that we thought were shorts or promotions. Had we acted on them, we might have lost all of our money, every though we were right just about every time. A bubble plays on human nature. Nobody knows when it's going to pop, or how high it will go before it pops." (2002 Annual Meeting)
"I had a harrowing experience shorting a stock in 1954. I wouldn't have been wrong over 10 years, but I was very wrong after 10 weeks, which was the relevant period. My net worth was evaporating." by Warren Buffett (2002 Annual Meeting)
Critique of EBITDA
"It amazes me how widespread the use of EBITDA has become. People try to dress up financial statements with it."
"We won't buy into companies where someone's talking about EBITDA. If you look at all companies, and split them into companies that use EBITDA as a metric and those that don't, I suspect you'll find a lot more fraud in the former group. Look at companies like Wal-Mart, GE and Microsoft -- they'll never use EBITDA in their annual report."
"People who use EBITDA are either trying to con you or they're conning themselves. Telecoms, for example, spend every dime that's coming in. Interest and taxes are real costs." by Warren Buffett (2002 Annual Meeting)
How to avoid fraud
"We've been defrauded very infrequently over the years. If we do get defrauded, it'll be by someone carrying [Ben Franklin's] Poor Richard's Almanac under his arm."
"Crooks are often obvious. For example, Robert Maxwell's nickname was 'The Bouncing Check,' yet Salomon was trying to lend him money until three weeks before he went under. Wall Street has no filter, as long as there's profit." by Warren Buffett (2002 Annual Meeting)
Fannie Mae, Freddie Mac and Other Highly Leveraged Financial Institutions
Buffett continued, "There are many things you don't know by looking at a financial company's financial statements. We've seen enough to be wary. We can't be 100% sure that we like what's going on. With some types of companies, you can spot problems early, but you spot troubles in financial institutions late." by Warren Buffett
"Financial institutions make us nervous when they're trying to do well." [Think about that one for a while.] by Charlie Munger (2001 Annual Meeting)
Turnarounds vs. One-Foot Hurdles
"Both our operating and investment experience cause us to conclude that “turnarounds” seldom turn, and that the same energies and talent are much better employed in a good business purchased at a fair price than in a poor business purchased at a bargain price." by Warren Buffett
Losing and Regaining Competitive Advantage
“There aren't many examples of companies that lose and then regain competitive advantage. I have a friend who likes taking over lousy businesses and trying to turn them into great businesses [I wonder whether he was referring to Jack Byrne of White Mountains Insurance?]. I asked him for examples of this [bad businesses turning into good businesses] over the past 100 years [and he couldn't name very many].”
“One example: Pepsi lost its edge post-WW II when costs went up, but they successfully changed. To some extent Gillette lost its competitive edge in the 1930s to penny blades, but then regained it.”
“But generally speaking, when a company loses its edge, it's very difficult to regain. Packard [cars] went downscale one year and never regained its upscale image. Department stores have done this. You can always juice sales by going down market, but it's hard to go back up market.” by Warren Buffett (2003 Annual Meeting)
IQ
Sunday, November 27, 2005
The Borsheim Advantage
“The Borsheim selections are sent all over the country, some to people no one at Borsheim's has ever met. (They must always have been well recommended, however.) While the number of mailings in 1990 was a record, Ike has been sending merchandise far and wide for decades. Misanthropes will be crushed to learn how well our "honor-system" works: We have yet to experience a loss from customer dishonesty. At Borsheim’s, we attract business nationwide because we have several advantages that competitors can't match. The most important item in the equation is our operating costs, which run about 18% of sales compared to 40% or so at the typical competitor. (Included in the 18% are occupancy and buying costs, which some public companies include in "cost of goods sold.") Just as Wal-Mart, with its 15% operating costs, sells at prices that high-cost competitors can't touch and thereby constantly increases its market share, so does Borsheim's. What works with diapers works with diamonds.” by Warren Buffett
Purchase of Nebraska Furniture Mart
“One question I always ask myself in appraising a business is how I would like, assuming I had ample capital and skilled personnel, to compete with it. I’d rather wrestle grizzlies than compete with Mrs. B and her progeny. They buy brilliantly, they operate at expense ratios competitors don’t even dream about, and they then pass on to their customers much of the savings. It’s the ideal business - one built upon exceptional value to the customer that in turn translates into exceptional economics for its owners.” by Warren Buffett
Purchase of Wells Fargo
Inevitables
Saturday, November 26, 2005
Investing expectations
Munger: "One of the smartest things a person can do is dampen investment expectations, especially with Berkshire. That would be mature and responsible. I like our model and we should do nicely."
"The problem is the starting point in predicting modest returns for equity investors. [Expectations were too high.] In 1999, a Gallup poll showed people expected 15% [returns from stocks] in a low inflation environment. In a low inflation environment, how much will GDP grow? If there's 2% inflation and 3% [real] growth, that's 5%. This will be the rate of corporate growth, so if you add dividends, you get 6-7% [annualized returns] before frictional costs -- and investors incur high frictional costs (they don't have to, but they do) -- which adds up to 1.5%. [This 4.5-5.5% is] not bad." by Warren Buffett
Capital Expenditure
“Capital outlays at a business can be skipped, of course, in any given month, just as a human can skip a day or even a week of eating. But if the skipping becomes routine and is not made up, the body weakens and eventually dies. Furthermore, a start-and-stop feeding policy will over time produce a less healthy organism, human or corporate, than that produced by a steady diet. As businessmen, Charlie and I relish having competitors who are unable to fund capital expenditures.” by Warren Buffett
Acquisitions
“In making acquisitions, Charlie and I have tended to avoid companies with significant post-retirement liabilities. As a result, Berkshire's present liability and future costs for post-retirement health benefits - though we now have 22,000 employees - are inconsequential. I need to admit, though, that we had a near miss: In 1982 I made a huge mistake in committing to buy a company burdened by extraordinary post-retirement health obligations. Luckily, though, the transaction fell through for reasons beyond our control. Reporting on this episode in the 1982 annual report, I said: "If we were to introduce graphics to this report, illustrating favorable business developments of the past year, two blank pages depicting this blown deal would be the appropriate centerfold." Even so, I wasn't expecting things to get as bad as they did. Another buyer appeared, the business soon went bankrupt and was shut down, and thousands of workers found those bountiful health-care promises to be largely worthless.” by Warren Buffett
Growth
“Carl Sagan has entertainingly described this phenomenon, musing about the destiny of bacteria that reproduce by dividing into two every 15 minutes. Says Sagan: "That means four doublings an hour, and 96 doublings a day. Although a bacterium weighs only about a trillionth of a gram, its descendants, after a day of wild asexual abandon, will collectively weigh as much as a mountain...in two days, more than the sun - and before very long, everything in the universe will be made of bacteria." Not to worry, says Sagan: Some obstacle always impedes this kind of exponential growth. "The bugs run out of food, or they poison each other, or they are shy about reproducing in public."
"We don't want people focusing on growth. It's suicide [in the insurance business]." by Warren Buffett
Stock Options
“Does this mean that these important items of cost should be ignored simply because they can't be quantified with absolute accuracy? Of course not. Rather, these costs should be estimated by honest and experienced people and then recorded. When you get right down to it, what other item of major but hard-to-precisely-calculate cost - other, that is, than stock options - does the accounting profession say should be ignored in the calculation of earnings?”
“Moreover, options are just not that difficult to value. Admittedly, the difficulty is increased by the fact that the options given to executives are restricted in various ways. These restrictions affect value. They do not, however, eliminate it. In fact, since I'm in the mood for offers, I'll make one to any executive who is granted a restricted option, even though it may be out of the money: On the day of issue, Berkshire will pay him or her a substantial sum for the right to any future gain he or she realizes on the option. So if you find a CEO who says his newly-issued options have little or no value, tell him to try us out. In truth, we have far more confidence in our ability to determine an appropriate price to pay for an option than we have in our ability to determine the proper depreciation rate for our corporate jet.”
“It seems to me that the realities of stock options can be summarized quite simply: If options aren't a form of compensation, what are they? If compensation isn't an expense, what is it? And, if expenses shouldn't go into the calculation of earnings, where in the world should they go?” by Warren Buffett
Dividend Policy
Selling Policy
“We need to emphasize, however, that we do not sell holdings just because they have appreciated or because we have held them for a long time. (Of Wall Street maxims the most foolish may be "You can't go broke taking a profit.") We are quite content to hold any security indefinitely, so long as the prospective return on equity capital of the underlying business is satisfactory, management is competent and honest, and the market does not overvalue the business.”
“Selling, however, is a different story. There, our pace of activity resembles that forced upon a traveler who found himself stuck in tiny Podunk's only hotel. With no T.V. in his room, he faced an evening of boredom. But his spirits soared when he spied a book on the night table entitled "Things to do in Podunk." Opening it, he found just a single sentence: "You're doing it."”
“Interestingly, corporate managers have no trouble understanding that point when they are focusing on a business they operate: A parent company that owns a subsidiary with superb long-term economics is not likely to sell that entity regardless of price. "Why," the CEO would ask, "should I part with my crown jewel?" Yet that same CEO, when it comes to running his personal investment portfolio, will offhandedly - and even impetuously - move from business to business when presented with no more than superficial arguments by his broker for doing so. The worst of these is perhaps, "You can't go broke taking a profit." Can you imagine a CEO using this line to urge his board to sell a star subsidiary? In our view, what makes sense in business also makes sense in stocks: An investor should ordinarily hold a small piece of an outstanding business with the same tenacity that an owner would exhibit if he owned all of that business.” by Warren Buffett
Buying Policy
“Buy companies with strong histories of profitability and with a dominant business franchise.”
“An investor should act as though he had a lifetime decision card with just twenty punches on it.”
“It is more important to say "no" to an opportunity, than to say "yes".”
“Always invest for the long term.”
“Buy a business, don't rent stocks.”
“An investor should ordinarily hold a small piece of an outstanding business with the same tenacity that an owner would exhibit if he owned all of that business.”
“Buy pieces of wonderful companies that you intend to keep forever.”
"Our investments continue to be few in number and simple in concept: The truly big investment idea can usually be explained in a short paragraph. We like a business with enduring competitive advantages that is run by able and owner-oriented people. When these attributes exist, and when we can make purchases at sensible prices, it is hard to go wrong (a challenge we periodically manage to overcome).
“Before looking at new investments, we consider adding to old ones. If a business is attractive enough to buy once, it may well pay to repeat the process. We would love to increase our economic interest in See's or Scott Fetzer, but we haven't found a way to add to a 100% holding. In the stock market, however, an investor frequently gets the chance to increase his economic interest in businesses he knows and likes. Last year we went that direction by enlarging our holdings in Coca-Cola and American Express.”
“When carried out capably, an investment strategy of that type will often result in its practitioner owning a few securities that will come to represent a very large portion of his portfolio. This investor would get a similar result if he followed a policy of purchasing an interest in, say, 20% of the future earnings of a number of outstanding college basketball stars. A handful of these would go on to achieve NBA stardom, and the investor's take from them would soon dominate his royalty stream. To suggest that this investor should sell off portions of his most successful investments simply because they have come to dominate his portfolio is akin to suggesting that the Bulls trade Michael Jordan because he has become so important to the team.”
“Be fearful when others are greedy and greedy only when others are fearful.”
"The most common cause of low prices is pessimism -- some times pervasive, some times specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It's optimism that is the enemy of the rational buyer.”
Munger: "If you buy something because it's undervalued, then you have to think about selling it when it approaches your calculation of its intrinsic value. That's hard. But if you buy a few great companies, then you can sit on your $%@. That's a good thing." Buffett added, "We want to buy stocks to hold forever."
“Focus on price and value. If a stock gets cheaper and you have some cash, buy more. We sometimes stop buying when prices goes up. This cost us $8 billion a few years ago when we were buying Wal-Mart. When we're buying something, we want the price to go down and down and down.” by Warren Buffett
Debt
“At the height of the debt mania, capital structures were concocted that guaranteed failure: In some cases, so much debt was issued that even highly favorable business results could not produce the funds to service it. One particularly egregious "kill- 'em-at-birth" case a few years back involved the purchase of a mature television station in Tampa, bought with so much debt that the interest on it exceeded the station's gross revenues. Even if you assume that all labor, programs and services were donated rather than purchased, this capital structure required revenues to explode - or else the station was doomed to go broke. (Many of the bonds that financed the purchase were sold to now-failed savings and loan associations; as a taxpayer, you are picking up the tab for this folly.)” by Warren Buffett
Share Repurchase
“There is only one combination of facts that makes it advisable for a company to repurchase its shares: First, the company has available funds — cash plus sensible borrowing capacity — beyond the near-term needs of the business and, second, finds its stock selling in the market below its intrinsic value, conservatively-calculated. To this we add a caveat: Shareholders should have been supplied all the information they need for estimating that value. Otherwise, insiders could take advantage of their uninformed partners and buy out their interests at a fraction of true worth. We have, on rare occasions, seen that happen. Usually, of course, chicanery is employed to drive stock prices up, not down. The business “needs” that I speak of are of two kinds: First, expenditures that a company must make to maintain its competitive position (e.g., the remodeling of stores at Helzberg’s) and, second, optional outlays, aimed at business growth, that management expects will produce more than a dollar of value for each dollar spent (R. C. Willey’s expansion into Idaho).”
“When available funds exceed needs of those kinds, a company with a growth-oriented shareholder population can buy new businesses or repurchase shares. If a company’s stock is selling well below intrinsic value, repurchases usually make the most sense. In the mid-1970s, the wisdom of making these was virtually screaming at managements, but few responded. In most cases, those that did made their owners much wealthier than if alternative courses of action had been pursued. Indeed, during the 1970s (and, spasmodically, for some years thereafter) we searched for companies that were large repurchasers of their shares. This often was a tipoff that the company was both undervalued and run by a shareholder-oriented management.”
“That day is past. Now, repurchases are all the rage, but are all too often made for an unstated and, in our view, ignoble reason: to pump or support the stock price. The shareholder who chooses to sell today, of course, is benefited by any buyer, whatever his origin or motives. But the continuing shareholder is penalized by repurchases above intrinsic value. Buying dollar bills for $1.10 is not good business for those who stick around.”
“Charlie and I admit that we feel confident in estimating intrinsic value for only a portion of traded equities and then only when we employ a range of values, rather than some pseudo-precise figure. Nevertheless, it appears to us that many companies now making repurchases are overpaying departing shareholders at the expense of those who stay. In defense of those companies, I would say that it is natural for CEOs to be optimistic about their own businesses. They also know a whole lot more about them than I do. However, I can’t help but feel that too often today’s repurchases are dictated by management’s desire to “show confidence” or be in fashion rather than by a desire to enhance per-share value.” by Warren Buffett
Cost Structures
Earnings
“20% of Fortune 500 companies will be earning significant less in five years, but I don't know which 20%. If you can't come up with reasonable estimates for that, then you move on.” by Warren Buffett
Management vs. Business
Time
"I could give you other personal examples of "bargain-purchase" folly but I'm sure you get the picture: It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price. Charlie understood this early; I was a slow learner. Now, when buying companies or common stocks, we look for first-class businesses accompanied by first-class managements." by Warren Buffett
Companies to Own
We select our marketable equity securities in much the same way we would evaluate a business for acquisition in its entirety. We want the business to be
- one that we can understand,
- with favorable long-term prospects,
- operated by honest and competent people, and
- available at a very attractive price.
Good Business has:
- an ability to increase prices rather easily (even when product demand is flat and capacity is not fully utilized) without fear of significant loss of either market share or unit volume.
- an ability to accommodate large dollar volume increases in business (often produced by inflation than by real growth) with only minor additional investment of capital.
- low cost provider (in enormous market place).
by Warren Buffett
Book Value vs. Intrinsic Value
Focus Investing and diversification
“Our policy is to concentrate holdings. We try to avoid buying a little of this or that when we are only lukewarm about the business or its price. When we are convinced as to attractiveness, we believe in buying worthwhile amounts.”
“You don't have to be right on everything or 20%, 10%, or 5% of businesses. You only have to be right one or two times a year. I used to handicap horses. You can come up with a very profitable decision on a single company. If someone asked me to handicap the 500 companies in the S&P 500, I wouldn't do a very good job. You only have to be right a few times in your lifetime, as long as you don't make any big mistakes.” by Warren Buffett
Investor’s Temperament
“Temperament is what causes smart people not to function well.”
"Fear is the foe of the faddist, but the friend of the fundamentalist." by Warren Buffett
Inactivity
Sustainability
"We like to own castles with large moats filled with sharks and crocodiles that can fend off marauders -- the millions of people with capital that want to take our capital. “We think in terms of moats that are impossible to cross, and tell our managers to widen their moat every year, even if profits do not increase every year. We think almost all of our businesses have big and widening moats."
"Usually, if something can gain competitive advantage very quickly, it can lose it very quickly, so be careful of industries in flux."
"You will see that we favour businesses and industries unlikely to experience major change. The reason for that is simple: We are searching for operations that we believe are virtually certain to possess enormous competitive strength ten or twenty years from now. A fast-changing industry environment may offer the chance for huge wins, but it precludes the certainty we seek."
"The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage. The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors."
“Experience, however, indicates that the best business returns are usually achieved by companies that are doing something quite similar today to what they were doing five or ten years ago. That is no argument for managerial complacency. Businesses always have opportunities to improve service, product lines, manufacturing techniques, and the like, and obviously these opportunities should be seized. But a business that constantly encounters major change also encounters many chances for major error. Furthermore, economic terrain that is forever shifting violently is ground on which it is difficult to build a fortress-like business franchise. Such a franchise is usually the key to sustained high returns.” by Warren Buffett
Degree-of-difficulty
"What counts for most people in investing is not how much they know, but rather how realistically they define what they don't know. An investor needs to do very few things right as long as he or she avoids big mistakes." by Warren Buffett
Long-term Investing
"We try to price, rather than time, purchases. In our view, it is folly to forego buying shares in an outstanding business whose long-term future is predictable, because of short-term worries about an economy or a stock market that we know to be unpredictable. Why scrap an informed decision because of an uninformed guess?" by Warren Buffett
Mr. Market
“Even though the business that the two of you own may have economic characteristics that are stable, Mr. Market's quotations will be anything but. For, sad to say, the poor fellow has incurable emotional problems. At times he feels euphoric and can see only the favorable factors affecting the business. When in that mood, he names a very high buy-sell price because he fears that you will snap up his interest and rob him of imminent gains. At other times he is depressed and can see nothing but trouble ahead for both the business and the world. On these occasions he will name a very low price, since he is terrified that you will unload your interest on him.”
“Mr. Market has another endearing characteristic: He doesn't mind being ignored. If his quotation is uninteresting to you today, he will be back with a new one tomorrow. Transactions are strictly at your option. Under these conditions, the more manic-depressive his behavior, the better for you.”
“Following Ben's teachings, Charlie and I let our marketable equities tell us by their operating results - not by their daily, or even yearly, price quotations - whether our investments are successful. The market may ignore business success for a while, but eventually will confirm it. As Ben said: "In the short run, the market is a voting machine but in the long run it is a weighing machine." The speed at which a business's success is recognized, furthermore, is not that important as long as the company's intrinsic value is increasing at a satisfactory rate. In fact, delayed recognition can be an advantage: It may give us the chance to buy more of a good thing at a bargain price.”
"[Many] investors who expect to be ongoing buyers of investments throughout their lifetimes... illogically become euphoric when stock prices rise and unhappy when they fall. They show no such confusion in their reaction to food prices: Knowing they are forever going to be buyers of food, they welcome falling prices and deplore price increases. (It's the seller of food who doesn't like declining prices.) Similarly, at the Buffalo News we would cheer lower prices for newsprint -- even though it would mean marking down the value of the large inventory of newsprint we always keep on hand -- because we know we are going to be perpetually buying the product.
"The market, like the Lord, helps those who help themselves. But, unlike the Lord, the market does not forgive those who know not what they do. For the investor, a too-high purchase price for the stock of an excellent company can undo the effects of a subsequent decade of favorable business developments."
"A short quiz: If you plan to eat hamburgers throughout your life and are not a cattle producer, should you wish for higher or lower prices for beef? Likewise, if you are going to buy a car from time to time but are not an auto manufacturer, should you prefer higher or lower car prices? These questions, of course, answer themselves."
"But now for the final exam: If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period? Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall. In effect, they rejoice because prices have risen for the "hamburgers" they will soon be buying. This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices." by Warren Buffett
Margin of Safety
Investment Education
Friday, November 25, 2005
My hero: Warren Buffett
May all those who learn and instil his wisdom be financially enlightened!
Warmest regards,
Dah Hui Lau (David)
dahhuilaudavid@gmail.com
Peter Drucker (95 years old) (Nov 19, 1909 – Nov 11, 2005)
"The world knows he was the greatest management thinker of the last century," Jack Welch, former chairman of General Electric Co.
What John Maynard Keynes is to economics or W. Edwards Deming to quality, Drucker is to management.
Among Drucker’s best ideas:
- Decentralization (1940s).
- Workers should be treated as assets, not as liabilities to be eliminated (1950s).
- "No business without a customer" (1950s).
- On Leadership: Don’t ever think or say “I.” Think and say “we.”
- On Work: Focus on opportunities rather than problems.
- On Decisions: Every decision is risky. Risks can be minimised if you know when a decision is necessary, how to clearly define a problem and tackle it directly, and that you’ll have to make comprises in the end.
The above information has been obtained from BusinessWeek
May Peter Drucker rest in peace.
Dah Hui Lau (David)
dahhuilaudavid@gmail.com
Thursday, November 24, 2005
Fund manager focuses on worn stocks with potential; Jan 19, 2005
A bargain hunter, Rodriguez looks for beaten-up stocks with potential to turn around. At the heart of his philosophy is the question, "Am I being compensated for the risks I perceive in this investment?" If the answer isn't "yes," he looks elsewhere — even if that means parking money in cash or money market securities.
http://www.usatoday.com/money/perfi/general/2005-01-18-investor-insight_x.htm
All the best,
Dah Hui Lau (David)
Dah Hui Lau's Testimonials
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Dah Hui Lau (David)
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Dah Hui Lau's Analysis / Comments / Discussions:
- MGIC Investment Corporation; MTG Feb 10, 2006
- What is your expectation of long term BRK performance; Feb 16, 2006
- Movie Gallery (MOVI); Feb 24, 2006
- Black & Decker (BDK) at $83; Feb 25, 2006
- Is Google Overvalued at $377? Feb 25, 2006
- Discussions on "Is Google Overvalued at $377? Feb 25, 2006"
- Berkshire: Your Biggest Holding? March 6, 2006
- Gannett Corp Undervalued at $61.26; March 14, 2006
- Intel Corp; INTC March 29, 2006
- Intel Corp; INTC Part II April 1, 2006
- Google; GOOG April 1, 2006
- Gannett Corp; GCI April 2, 2006
- Telstra Corporation; TLS April 4, 2006
- WPS Resources Corp; WPS April 5, 2006
- Berkshire Hathaway; BRK.A April 6, 2006
- Berkshire Hathaway; BRK.A Reasons I love Berkshire April 2006
- Gannett Co.;GCI April 19, 2006
- Russell Corporation; RML April 20, 2006
- Superior Stock Return by having "Founders Keepers" April 20, 2006
- Some great quotes April 21, 2006
- Some Great Quotes; April 26, 2006
- Investment from Difference Perceptive April 28, 2006
- Microsoft; MSFT, A Good Investment? April 29, 2006
- Eight signs Microsoft is dead in the water; May 5, 2006
- Microsoft, Where is your "Moat"? May 8, 2006
- Microsoft's New Brain; May 10, 2006
- New Century, New Wealth May 11, 2006
- Dell, An Excellent Company at Bargain Price
- K-Swiss Inc. Excellent Investment
- Bill Gates' New Life Goal
- EarthLink, ELNK, Interesting but Risky Company
- PartyGaming
- Online Internet Gambling Discussions July 20, 2006
- Dell a Value Play
- PartyGaming plans expansion outside U.S. July 21, 2006
- Amazon, A Scary Drop! July 26, 2006
- MGIC Investment Corp (MTG) at $58.44
- Partygaming 1Qtr Results Sept 7, 2006
- Partygaming plunging price Sept 7, 2006
- Lau Model Portfolio
- Zacks Buy List: K-Swiss (KSWS) Strong Buy
- Intel: Fat to Lean Sept 11, 2006
- Is online gambling now definitely illegal in the US?
- The Buckle Inc. (BKE) at $35.10
- My personal view on Dell
- Amaranth: Speculating and Trading don't Work
- Thought on Portfolio Construction
- PartyGaming's Meltdown and Lessons Learnt
- PartyGaming drops out of FTSE 100
- Rumination on 3Qtr Results: MGIC Investment Corp (MTG)
- Coca Cola: Potential Purchase?
- Pfizer (PFE): Potential Purchase? Oct 19, 2006
Albert Einstein's Wisdom:
Andrew Carnegie's Wisdom:
Anne Gudefin's Wisdom:
Arnold Van Den Berg's Wisdom:
- Arnold Van Den Berg Interview; June 28, 2004
- The Value Investor; Dec 31, 2004
- Arnold Van Den Berg: Large company stocks are 27% undervalued May 4, 2006
Arpit Ranka's Wisdom:
Benjamin Graham's Wisdom:
- Benjamin Graham on Fixed Income (Bond) Investing
- Graham Stock Gainers; Feb 15, 2006
- 2 Things I Learned From Benjamin Graham; Feb 28, 2006
Bill Gates' Wisdom:
- Bill Gates reboots : Microsoft's founder on his decision to step aside, Warren Buffett's gift, and why it all gets him a little choked up
- Bill Gates on Vaccines
Bill Miller's Wisdom:
- Miller Beats S&P 15th Year in a Row
- Bill Miller sees higher value in Google; January 20, 2006
- Bill Miller's Secrets to Success; Jan 27, 2006
- Bill Miller: Where to Invest Now and the 5 Year Psychological Cycle April 26, 2006
- Legg Mason's Miller Favors Biggest U.S. Stocks, Buys AIG, GE
- Bill Miller, Money Master
Bill Nygren's Wisdom:
Bruce Berkowitz's Wisdom:
- Bruce Berkowitz Interview; March 31, 2006
- Bruce Berkowitz Investing Philosophy May 10, 2006
- Bruce Berkowitz: Forget GAAP accounting.
Bruce Sherman's Wisdom:
Charles de Vaulx's Wisdom:
Charles Mizrahi's Wisdom:
Charlie Munger's Wisdom:
- Future returns from equities
- The scandal of American pension fund accounting
- Extraordinary Charges
- Becoming a good investor
- Investing mental models
- Buying into stock declines
- Universities
- The importance of reading
- Retailing and Costco
- How to get rich
- State Farm
- How to detect bad reserving
- Insurance risk
- Wrigley
- USG
- Financial industry
- Risk of the unexpected
- Expect the unexpected (Japan example)
- Derivatives
- Practice Evolution
- Be satisfied
- Economic Value Added
- Cost of capital
- The World According to "Poor Charlie"; Dec 2005
- Charlie Munger on Investing Expectation
- Charlie Munger on Successes and Failures
- Charlie Munger on Iscar Metalworking Cos.
- Charlie Munger on Newspaper Companies
- Charlie Munger on Jeremy Siegel
- Wesco Financial Annual Meeting, May 11, 2006
- An Afternoon with Charlie Munger July 26, 2006
- Munger on Human Misjudgments
Chartered Financial Analyst:
Chet Holmes' Wisdom:
Chris Davis' Wisdom:
Columbia Business School:
Deep Wealth's Wisdom:
easyGroup's Manual:
Eddie Lampert's Wisdom:
- Eddie Lampert: An Olympic High Jumper?
- Eddie Lampert: The best investor of his generation; Feb 6, 2006
- Chairman's Letter: Edward Lampert; March 15, 2006
- Eddie Lampert and Sears by Mike Onghai May 5, 2006
Geoff Gannon's Wisdom:
Henry Lu's Wisdom:
Irwin Michael's Wisdom:
- Irwin Michael's Interview on ABC Dirt-Cheap Stock Fund; Feb 13, 2006
- Meeting with Irwin Michael, Part 1; Feb 20, 2006
Jackie Chan's Wisdom:
James Glassman's Wisdom:
Jim Chuong's Wisdom:
Joel Greenblatt's Wisdom:
John Dorfman's Wisdom:
- Robot Portfolio Steams to 7th-Straight Victory: John Dorfman; Jan 3, 2006
- Pfizer, Chubb Are Among 10 Stocks for Long Haul: John Dorfman; Feb 21, 2006
- Exxon, Berkshire, K-Swiss Pass My 15-15 Screen: John Dorfman
John Maxwell's Wisdom:
Larry Sarbit's Wisdom:
Mark Seller's Wisdom:
Marty Whitman's Wisdom:
- Marty Whitman Speech at AAII-NYC; Jan. 11, 2006
- Marty Whitman's 'Safe and Cheap' Approach; Jan 27, 2006
- Exclusive Insights from Marty Whitman's NYSSA talk! Feb 16, 2006
- Martin Whitman's "Cowardly" Safe-And-Cheap Way To Invest; Feb 21, 2006
- Martin J. Whitman Profile
- The Evolution Of Marty Whitman
- Sears shareholder exiting; Third Avenue fund sells 250,000 shares July 21, 2006
Mason Hawkins' Wisdom:
Mike Hochholzer's Wisdom:
Michael J. Mauboussin's Wisdom:
Mike Price's Wisdom:
Motley Fool's Wisdom:
- Foolish Fundamentals: Enterprise Value
- Foolish Fundamentals: Margins
- Foolish Fundamentals: Free Cash Flow
- Small Advantages, Big Wins; Feb 28, 2006
- Motley Fool: Insider Holdings
- Five Lessons From Playing Poker
MSN BRK Shareholders' Board's Wisdom:
Muhammed Yunus' Wisdom:
Olstein Financial Alert Fund:
- A Decade of Shareholder Letter excerpts
- The Price of Victory; Feb 22, 2006
- Fighting an investing slump; April 2, 2006
Peter Drucker's Summary:
Peter Lynch's Wisdom:
Prem Watsa's Wisdom:
Prof. Bruce Greenwald's Wisdom:
Prof. Sanjay Bakshi's Wisdom:
Randy Oliver's Wisdom:
Richard Russell's Wisdom:
Robert Rodriguez's Wisdom:
Ronald Muhlenkamp's Wisdom:
- How To Choose a Money Manager
- What does "prosperity" mean to you?
- Ronald Muhlenkamp Interview; Feb 24, 2006
Seth Klarman's Wisdom:
Sir John Templeton's Wisdom:
- One on One with Sir John Templeton; Feb 2, 2004
- An Investment Legend's Advice; Feb 4, 2004
- Sir John Templeton interview; February 2005
Theo Wong's Wisdom:
Tom Brown's Wisdom:
Tom Gayner's Wisdom:
Tom Stanley's Wisdom:
Tweedy, Browne Company LLC's Wisdom:
Wallace Weitz's Wisdom:
Warren Buffett's Wisdom:
- My hero: Warren Buffett
- Warren Buffett’s Biography
- Berkshire Hathaway’s Holdings
- Berkshire Hathaway Annual Reports
- Berkshire Hathaway Intrinsic Valuator
- Investment Education
- Margin of Safety
- Mr. Market
- Long-term Investing
- Degree-of-difficulty
- Sustainability
- Inactivity
- Investor’s Temperament
- Book Value vs. Intrinsic Value
- Focus Investing and diversification
- Companies to Own
- Time
- Management vs. Business
- Cost Structures
- Earnings
- Share Repurchase
- Debt
- Buying Policy
- Selling Policy
- Dividend Policy
- Stock Options
- Growth
- Acquisitions
- Capital Expenditure
- Investing expectations
- Purchase of Wells Fargo
- Inevitables
- Purchase of Nebraska Furniture Mart
- The Borsheim Advantage
- IQ
- Losing and Regaining Competitive Advantage
- Turnarounds vs. One-Foot Hurdles
- Fannie Mae, Freddie Mac and Other Highly Leveraged Financial Institutions
- How to avoid fraud
- Critique of EBITDA
- Shorting stocks
- Index funds
- Feedback mechanisms
- Derivatives
- Preparing for the future
- Happiness and Success
- Stock Market Predictions
- Philanthropy
- Buffett Succeeds at Nothing; Oct 30, 2002
- Warren Buffett and Bill Gates Q&A Video; Oct 2005
- Warren Buffett & Bill Gates: The $91 Billion Conversation; Oct 31, 2005
- Warren Buffett, Unplugged; Nov 12, 2005
- University of Kansas Buffett Q&A; Dec 2, 2005
- Buffett - The Ultimate Financial Zen Master; Jan 18, 2006
- Buffett's Coca-Cola stake an example of value of dividends; January 28, 2006
- 24 Buffet Ideas to win 365 battles every year
- Interview of Warren Buffett on CNBC on March 20, 2006
- Inside the strategy of Soros and Buffett; April 8, 2006
- 2005 Sayings of Chairman Buffett
- Berkshire Hathaway 1st Quarter Results Highlights May 6, 2006
- Does it pay to be 'the next Buffett'? May 6, 2006
- Warren Buffett on Compensation
- Warren Buffett on Immigration Issue
- Warren Buffett on Hurricane Issue
- Warren Buffett on Media Business
- Warren Buffett on Housing Market
- Audio report about Buffett and Wertheimer Deal (4Mins)
- Warren Buffett on Commodities Bubble
- Warren Buffett on Manufactured Housing
- Warren Buffett on Coca Cola
- Warren Buffett on Professions
- Warren Buffett on Charities
- Warren Buffett on Newspaper Companies
- Warren Buffett on Naked Short Selling
- Berkshire Hathaway Annual General Meeting 2006 Notes May 13, 2006
- Buffett's $15 Billion Tease May 13, 2006
- Top 20 Questions From The 2006 Berkshire Hathaway Annual Meeting
- Berkshire Hathaway Acquisitions List
- Berkshire Hathaway: Buffett's Attraction
- Buffett to auction another lunch on eBay
- Berkshire Hathaway A Good Business by Buffett Standard
- Profit Implications of Underwriting Discipline
- Warren Buffett Power Lunch to Benefit Glide Foundation
- Warren Buffett gives away his fortune
- A Discussion with Warren Buffett and Bill and Melinda Gates
- Charlie Rose - An Exclusive Hour with Warren Buffett and Bill and Melinda Gates
- An Open Letter to Warren Buffett
- Buffett Lunch fetches $620,100.00
- Joe Tahoe pens open letter to Warren Buffett July 7, 2006
- Charlie Rose Talk show on Warren Buffett PBS 11PM
- Would you like that $11 billion in twenties, Mr. Buffett?
- Ajit Jain, Potential Buffett Successor
- Buffett's Car on Auction!
- Happy Birthday, Mr. Buffett!
- Warren Buffett married his long-time companion, Astrid Menks
- Investment success like the masters
- The battle of the billionaires
- SmartMoney: What Would Warren Buy?
- Warren Buffett's car sells for $73,200 on eBay
- Historic Moment for Berkshire Hathaway Share Price: $100,000
- Warren Buffett CEO: Kevin Clayton Video Interview with Robert Miles
- Berkshire Hathaway Interesting News
Whitney Tilson's Wisdom:
- Our Favourite Stock Idea: Berkshire Hathaway
- Interviews with Rich Pzena & Zeke Ashton, February 2005
- Interview with David Einhorn, March 2005
- Interview with Mark Sellers, June 2005
- Interview with Jim Chanos, July 2005
- Interview with Lisa Rapuano, September 2005
- Interview with Larry Robbins, October 2005
- Interview with Arne Alsin
- Traits of Successful Money Managers
- Thoughts on Value Investing
- The Perils of Investor Overconfidence
- Buffettesque Superinvestors
- The Perfect Business
- Whitney Tilson Interview by Bloomberg; Feb 23, 2006
- Interview: Whitney Tilson; March 14, 2006
- Stick with the simple, if scary, solution; April 21, 2006
- Looking For Hidden Value With Whitney Tilson April 25, 2006
Year 2006 Interesting Articles:
- Money really doesn't buy happiness; Feb 13, 2006
- The Top 10 Fund Value Creators and Destroyers; Jan 23, 2006
- India Value Investing Conference; Jan 25, 2006
- How to Be a Buy-and-Hold Investor; March 13, 2006
- Do All Banks Have Moats? May 3, 2006
- Earth 'likely' hottest in 2,000 years
- FIFA World Cup Winner Prediction
- The 400 Richest Americans
Year 2005 Interesting Articles:
Other Interesting Articles:
If you have any comment, please send me an email.
Dah Hui Lau (David)