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

To: Paul Senior who wrote (797)	12/26/1998 11:19:00 PM
From: Tomato	Read Replies (1) \| Respond to of 4691

Paul, I think if you invested in WEB stalwarts the past 3 years that you would have done just fine. E.g. for past 3 years: KO 91%, WPPO 101%, WFC 140%, AXP 156%, DIS 58%, FRE 218%, BRK itself- around 125%. As to the outlook for Mr. Market- WEB is supposed to ignore the market and just buy companies that have a margin of safety, isn't he? I'd be tempted at current p/e and other valuation levels to wait for the market to crash before buying, but I also feel like the boy who cried "wolf." Of course, eventually the wolf did come, didn't he? ;-)

To: Paul Senior who wrote (797)	12/27/1998 12:01:00 AM
From: Michael Burry	Read Replies (3) \| Respond to of 4691

But in 1996, 1997, and 1998 fortunes were to be made, were made, and Buffett followers (those who waited for Buffett stocks)missed it. From his letter disbanding his partnership in 1969: "I am out of step with present conditions. When the game is no longer played your way, it is only human to say the new approach is all wrong, bound to lead to trouble, and so on...On one point, however, I am clear. I will not abandon a previous approach, whose logic I understand (although I find it difficult to apply) even though it may mean foregoing large, and apparently easy, profits to embrace an approach which I don't fully understand, have not practiced successfully, and which possibly could lead to a substantial permanent loss of capital." This statement is incredibly relevant today. One, Buffett was early by 3+ years in effectively calling a top by disbanding his partnership. But what a top it was. Two, he points out that it is indeed easy to say the new approach (i.e. the approach that is making the money today)is all wrong, and IMO this letter implies he considers that it may be too easy to decry the new approach. I'll give CW and JHG that Jim and I may find it too easy to criticize an approach that evidently neither of us have mastered, and which has in fact cost us in terms of lost opportunity (assuming we were to jump off before any upcoming crash, which we may not be inclined to do if we were having success with the go-go methods of the 90's). Three, it is that "substantial permanent loss of capital" which is the driving force behind my assessment of risk, and I see that potential here using history as a guide. And if history is any guide, it's when the speculative stocks (and yes, the stocks in the internet index are speculative) are jumping 30%/week and doubling every few months and every guest at your holiday parties wants to talk stocks, then a top is near, and it has been the greatest fools who bought stocks during those times, and history has demonstrated their foolishness. CW says but there's a new era. Fine, but when "new era" gets bandied about all over the place, that's the third strike IMO along with cocky cocktail talk and speculative runs. NOW, is Buffett buying? Ok, maybe a little , but what has he really been doing? Take a look at Berkshire's annual report and he's pretty clear about what he thinks of current stock prices and the (lack of)opportunity implied therein. And it's pretty clear he has put huge amounts into nontraditional investments (for him) such as silver (though to be fair, he mentions silver futures as far back as a late 70's interview with Train) and T-bonds. And there is very little evidence he's buying much of anything. Jim to me seems in tune with this, since he was at least mentioning to me and some others AMEX around the time that Buffett was adding to his position. Buffett-like companies are not much-discussed here of late because the pricing is all out of wack, reflecting the market. The spreadsheet I developed may not be all that absolutely accurate, but as a relative tool I'm finding utility in it, and nothing's jumping out at me. Quite a few fell to respectable ranges earlier this fall, but IMO still had a ways to go before really hitting "fat pitch" territory. With respect to investing like Buffett, keeping the bat on the shoulder in times like this is not a trait that Buffett would criticize, from my readings of him. And about missing those returns, well, Buffett displayed the same willingness to miss them back when he was a much less-wealthy individual (25 million net worth at the time). Good investing, Mike

To: Paul Senior who wrote (797)	12/27/1998 4:02:00 PM
From: Shane M	Respond to of 4691

Paul, The one thing that the Buffettology - both the book and the thread - has helped me with more than any other is "to focus on quality first, valuation second." Whether this relates to Buffett defined stocks, or to "quality" stocks in general, I feel this one change of focus has helped me tremendously. I think there are many people who listen to what Buffett, and then apply it to what many would feel are "non-Buffett" companies. While above a "buy" price now, I consider my purchase of Oracle ORCL in mid-98 a combination Buffett/Gorilla Game investment. I recently started a position in Peoplesoft PSFT, and based the purchase heavily on quality of business and Buffettology valuation methods. These kinds of investments don't get mentioned here much, because although they were influenced by this style of investment, most people don't think these investments qualify. I tend to mention them in passing and go on, because to insist they are Buffett stocks serves no purpose and just causes an uproar on this board. There are some buys out there. Some that I felt were Buffett stocks and placed unfilled bids on were: CPC, CHB, and TECH. Some on the thread feel strongly about BA. CAT is coming into valuation range also. RAL is moving down into a buy range. FIC is another company that I like and might qualify as a buy should price drop about 15-20%. Jim mentioned Dover as a favorite of his (DOV I think). I am looking to open positions on price weakness in most of these - although I'm not in any hurry given my perception of market heights. I say all this, because there are attractive companies out there at good valuations. Granted, you'll never get concensus on this board on much of anything, but can that be expected? There are others out there that I haven't mentioned because I'm pretty satisfied with the list of companies currently identified. Also, part of Buffett's game is to identify the companies you want to buy and wait on the right price. This is what many of us are doing on this thread. Shane

To: Paul Senior who wrote (797)	12/27/1998 5:16:00 PM
From: jhg_in_kc	Respond to of 4691

Paul Re: <<To me, to say by keeping your bat on your shoulder, all that you've lost is opportunity cost--I say that the opportunity cost is the greatest cost. There've been at least 3 straight years of great returns in the market.>> Paul, well said. that's exactly what led me to post my last post. Even just owning the S&P 500 Index Fund at Vanguard puts you 80% or so ahead for the last three years. HERE IS WAHT i AM ASKING: What value is using the Buffett criteria for investing if the approach prevents you from investing at all in what is one of history's more robust bull markets? This approach is not as bad as just blindly buying Amazon on its momentum but it doesnt seem to be much better either, judging by the purchases this thread has made or--more precisely--not made. I'd be interested to know what Stocks the Thread Leaders have bought besides BRKB in 1998, assuming they wish to share that information. My holdings are 40% Dell, 20% AOL, 20% BRKB, and the rest in CSCO, INKT, RMBS, EMC, and TLAB. jhg