Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Jurgis Bekepuris who wrote (3315)	2/24/1998 10:25:00 PM
From: Michael Burry	Read Replies (2) \| Respond to of 78497

This is a repost of a message by me on the Nike Yahoo thread. I thought it relevant to value investing in the Buffett way, and to understanding my Nike article. I must say, after a brief fling with Buffett, I am moving back to Graham/Tweedy Browne beliefs. True Buffett companies are richly priced, and I can't afford to buy up that much silver. A few points do matter. As an example: You buy a stock at 45, it goes to 80 in 3 years. That's a 21% annual compounding return. Buy at 40, it's a 26% return. At 35, it's a 32% return. Don't look at it as,"it's worth 80 in 3 years regardless," because most people invest the same amount of money no matter the price. Hence at 30 they would buy 300 shares, but at 45 they would buy 200 shares. This means that a few points on the compounding annual return becomes very important. $10,000 at 21% for 10 years gives %67,275. At 26% for 10 years gives $100,856. And at 32% for 10 years gives $160,598. In fact, the more one professes to be a long-term investor ("for my kid's kids"), the more one should pay attention to price (and thus to a few points here and there on expected annual compounding rate of return). Ironically, much of the feedback on my article has said, "I'm a long term investor, so what do I care about a few points." I detailed this in my MSN "Buffettology" article. There is also a "Buffettology" thread on SI that goes through it. This is also the reason my MSN "Running after Nike" article is framed like it is - wait for a better price. It is ok to miss a stock in search for a sufficient margin of safety - thus Buffett's admonition to "wait for the right pitch." Especially when you can see bad news on the horizon. The market is more short-term oriented than many like to believe, and it provides massive inefficiencies for patient investors. To invest like Buffett, target your return and wait for it. I provide a spreadsheet to help with this calculation in the "Buffettology" article. And I provide a 10-year version of the spreadsheet at my web site www.sealpoint.com. In advance, I should apologize to lovers of soundbites for the length of this note. I know there will be a few that already know this that will say, "that's common sense - there is nothing in this note that can't be had by reading." You're right. Good Investing, Mike The soundbite comment was in response to many on the Yahoo thread that complained we should keep posts limited to a few sentences at most. Certainly a "Just Do It" and "I Can" crowd. Good investing, Mike