Forum Archive Index - May 2002

["Phil Boeyen" <pboeyen@sharechat.co.nz>]

Hi Jerrold

> i could be completely wrong here but ...
>
> the way i see it, mr buffett is rich because:
> a) he buys stocks with other people's money (OPM), and
> b) he also doesn't buy for the capital increase, but for the dividends.

I haven't read an awful lot on Buffett, but I think part b) is incorrect.
>From what I understand, Buffett generally prefers to invest in companies
which do not pay dividends, partly because of tax reasons (I presume this is
because the US does not have imputation credits or franking like in Aussie
and NZ).  Buffett would also prefer a company to hold onto its profits
(retained earnings) and grow the business, which in turn will increase the
capital value of the investment.  He generally believes that a company will
be able to make better use/get a better return on the money than he can with
the dividend payout, taking into account tax payable.

> and the big one, if fundamental investment is the way to go, how come
> buffett is the only investor (be it fundamental or not) in the whole of
> the american rich list?  how come they aren't more?

not sure.  Buffett certainly had a head start on others - maybe in 40 years
time there will be more fundamental investors on the rich list?  are there
any chartists on the rich list?

cheers, phil


----------------------------------------------------------------------------
To remove yourself from this list, please use the form at
http://www.sharechat.co.nz/chat/forum/