Microsoft, Where is your "Moat"? May 8, 2006

I would like to quote Warren Buffett saying about "moat"......

"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."

"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."

I have written about Microsoft on April 29, 2006 and believe that it is a good company to own for the long-term. The most significant question regarding whether Microsoft is a good buy or not is down to its "moat". And, I do believe that Microsoft has strong "moat". RT Wolf has kindly allowed me to share his wisdom on Microsoft "moat".....

"The biggest thing that Microsoft has going for it is that people don't like change. People don't want to have to learn a new operating system or new way of doing things. Technologically savvy people often forget that other people don't want to spend time learning how to use a tool like a computer and would rather use it. If companies were to initiate changes to mac or linux, they would have to spend considerable time, effort and money retraining everyone. It's cheaper just to go with what works well enough. This is definitely a strength for Microsoft. In the operating system and office productivity suites arena, it is almost the same thing."

"Another biggest component of Microsoft moat: very high switching costs. The incompatibility and closed-source nature of Office formats is also a switching cost."

Remember, to invest successfully, one has to wait for the fat pitch!

Happy investing,
Dah Hui Lau (David)
dahhuilaudavid@gmail.com

To visit my archive: http://dahhuilaudavid.blogspot.com/2005/11/archive-of-dah-hui-laus-blog.html

Audio report about Buffett and Wertheimer Deal (4Mins)

Have a listen to Buffett comments.

http://www.isracast.com/transcripts/070506a_trans.htm

Happy investing,
Dah Hui Lau (David)
dahhuilaudavid@gmail.com

To visit my archive: http://dahhuilaudavid.blogspot.com/2005/11/archive-of-dah-hui-laus-blog.html

Warren Buffett on Housing Market

"I would not be surprised if there is some significant adjustment from the peak in high-priced areas such as California and Florida," said Buffett.

Annual General Meeting May 6, 2006

Charlie Munger on Successes and Failures

Munger on failure: "It's a good habit to trumpet your failures and be quiet about your successes."

Annual General Meeting May 6, 2006

Charlie Munger on Investing Expectation

For young people in the investment field, Munger offered this advice: "The best thing you can do is reduce your expectations."

Annual General Meeting May 6, 2006

Warren Buffett on Media Business

"Technology has opened up a huge variety of ways to be informed faster," Buffett said. "It hasn't expanded the time you have for entertainment or for acquiring knowledge. Anytime you get more and more people competing in any given area, generally the economics deteriorate. . . "

"Generally speaking, the economics of media businesses do not have a great outlook."

Annual General Meeting May 6, 2006

Warren Buffett on Hurricane Issue

"It's an explosive sort of equation that you're dealing with," Buffett said.

"The laws of thermodynamics are such that if the oceans get warmer - and they are getting warmer - the weather's going to have more high energy in it," said Berkshire Vice Chairman Charlie Munger. "I think we'd be out of our minds if we wrote more insurance as though global warming wasn't going to have any effect at all."

Annual General Meeting May 6, 2006

Warren Buffett on Immigration Issue

"Illegal immigration is a problem that should be addressed and addressed promptly," Buffett said. "I don't believe in shipping 11 million people away. I think we ought to enforce rules in the future. I don't think it (legalizing immigrants) would make a dramatic difference. You may end up paying a little more for meat in the end."

Annual General Meeting May 6, 2006

Warren Buffett on Compensation

"Managers of businesses dealing with wide price swings, such as petroleum, should be compensated for their performance in the things they can control, such as the cost of production. Profits or losses due to price trends beyond the managers' control are not a good basis for determining pay" said Warren Buffett.

Annual General Meeting May 6, 2006

Does it pay to be 'the next Buffett'? May 6, 2006

I read this article from Omaha.com, which I find it humorous! :) Enjoy....

"The Next Warren Buffett: A Compliment or a Curse?" The business press dusts off the headline whenever a value investor manages to turn a tidy profit with a Buffett-like strategy, but it's a difficult comparison to live up to. Few - if any - have risen to the occasion. That's probably why a question mark usually is appended to the phrase.

Here are a few of the investors who have contended with the loaded sobriquet in recent years.

Edward Lampert

Status: Chairman of Sears Holdings Corp.

In the same breath as Buffett: Business Week asked whether he might be the next Buffett after the hedge-fund manager bought a controlling stake in Kmart (which he later merged with Sears). The move gave rise to speculation he might turn the retailers into a holding company like Berkshire, which was once a textile mill.

Claim to fame: Lampert's ESL Investments hedge fund has generated average annual returns of 29 percent since its founding in 1988. But not all the numbers rival Buffett's: Only 100 shareholders, mostly professional investors, turned out to hear him discuss his vision for the company at its annual meeting this year.

Verdict: Not funny enough.


L. Dennis Kozlowski

Status: Former CEO of Tyco In- ternational Ltd., sentenced to eight to 25 years for stealing hundreds of millions of dollars from the company.

In the same breath as Buffett: Kozlowski once bragged that he would be the next Warren Buffett.

Claim to fame: Grew Tyco's businesses at an impressive rate through mergers and acquisitions but looted the company's coffers for lavish parties and a number of personal amenities, including a $6,000 shower curtain and a $17,100 traveling toiletry kit.

Verdict: Not thrifty enough.



William H. Miller III

Status: Chairman of Legg Mason Capital Management and portfolio manager for Legg Mason Value Trust.

In the same breath as Buffett: Having outperformed the S&P 500 stock index for 15 years in a row, his long-term investment prowess is often compared with that of Buffett.

Claim to fame: Miller manages the $11.6 billion Legg Mason Value Trust, which follows a value investing strategy similar to that espoused by Buffett. The fund, based in Boston, has generated average annual returns of 16.49 percent since its 1982 inception.

Verdict: Not Nebraskan enough.



Christopher K. Bagdasarian

Status: Ex-convict. Bagdasarian was sentenced to two years in prison in 1998 after pleading guilty to securities fraud, bank fraud and perjury. Barred by the Securities and Exchange Commission from association with brokers, dealers or investment advisers.

In the same breath as Buffett: Fortune magazine dubbed him the next Buffett when he an- nounced a $200 million initial public offering of Normandy America Inc., a fraudulent insurance company that planned to invest float, as Buffett does for Berkshire. As the fraud came to light, the company withdrew the offering after trading for one day on the Nasdaq exchange.

Claim to fame: Lied that he achieved a 10-year average annual return of 29.1 percent on assets that ranged as high as $731.3 million.

Verdict: Not honest enough.



Gerry Angulo

Status: President and publisher of the San Juan Star.

In the same breath as Buffett: In 1989, a profile in Forbes magazine asked whether he might be the next Buffett or "just another of the stock market's overnight wonders."

Claim to fame: His now-defunct, Miami-based partnership, First Capital Partners, posted gains of 142 percent in 1988. In 1994, he bought the Puerto Rican newspaper and has devoted his career to running it.

Verdict: Not investing enough.



Nicholas D. Gerber

Status: Portfolio manager for Ameristock Mutual Fund.

In the same breath as Buffett: Told Crain Communications in 2001 that he was trying to out-Buffett Warren through his value-slanted approach to indexing. He said, "I'm getting a later start than Warren Buffett did from an age perspective. . . . We have a lot of catching up to do. "

Claim to fame: The Ameristock fund generated double-digit returns four of the five years between 1996 and 2000. Since then, the fund has trailed the S&P 500 by a little less than 2 percentage points.

Verdict: Not catching up fast enough.



Richard B. Wright

Status: 25-year-old analyst for Davis Advisors in New York.

In the same breath as Buffett: Suggested to Buffett that he look at Clayton Homes Inc. in 2003, setting in motion the $1.7 billion purchase by Berkshire Hathaway.

Claim to fame: Received a letter of recommendation from Warren Buffett, an endorsement that was dubbed "a letter from God" by Brian Sullivan, chief executive officer of New York-based executive search firm Christian & Timbers.

Verdict: Not gray enough.

Article from: Omaha

Happy investing,

Dah Hui Lau (David)

dahhuilaudavid@gmail.com