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Strategies & Market Trends : Buffettology
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To: Wright Sullivan who wrote (907)1/3/1999 4:01:00 PM
From: James Clarke  Read Replies (2) of 4691
 
Charlie Munger is the Keith Richards of the investment world. A genius in his own right, but always living in the shadow. I found a Munger speech on institutional investing practices (boring as hell) on the Motley Fool a couple weeks ago. If you can find the Motley Fool's buy recommendation of BRK a week or so ago, its linked in there someplace.

And on all this gorilla game and identifying leaders early stuff, go back and read what Buffett wrote when he first profiled Coca Cola in his chairmans letters. About how he watched the business and the stock for years and years and decades without taking any action. Then probably 50 years after his first Coke and after Coke had dominated its market for decades, Buffett finally invested. And he did OK. There is no requirement that you be the first one in like a venture capitalist. This reduces your risk by a huge factor.

You tend to get shots at even the great ones at the right price if you're willing to be very patient. For example, Disney hit 25 this year. Was that the right price for somebody who really knows the business? I don't know, though it was certainly close to what I was targeting as an entry point based on preliminary valuation work. The point is that conventional wisdom just a short time earlier was that you could never get a shot at Disney or Gillette if you stuck to rigorous valuation criteria and demand a margin of safety. Conventional wisdom says these great companies are always going to be richly valued. I would disagree with that completely. Go back and look at the prices that Buffett paid for his stocks - he didn't pay 50 times earnings for Coke. He didn't even pay 20 times earnings.

The reason this is so hard to do is that when they are temporarily in your range, the exact same people are going to be telling you their business is going down the tubes.

JJC
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