Forum Archive Index - May 2002

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi jerrold,

>
> 
>my theory is that buffett isn't rich because he used fundamental
>investing. he's rich because he knows the power of gearing, how
>partnerships work, how to manage people, how insurance companies
>work, and he knows business like no-one's business :). 
> 
> 



So you are saying that people skills are important in business?  I 
wouldn't argue with you.  You seem to be saying that because it is 
other people Warren is managing who do much of the fundamental 
analysis within Berkshire Hathaway then it doesn't count as FA 
because Warren isn't doing it himself?  I can't agree with that.   
And gearing is part of fundamental analysis in case you haven't 
figured that out.

Fundamentals investing covers a lot more than just Warren Buffett 
though.  I read an interesting profile on retiring broker Michael 
Benjamin in the Independent on 17th April.  I quote from it, (with my 
remarks in brackets):

"Indeed, Benjamin's investment ideology closely mirrors the cautious 
approach of the famous US investor Warren Buffett-  Whose biography 
Benjamin has just read (Only just read it on his retirement, so 
becomes an instant expert on the topic!).

"Like Buffett, Benjamin says steer clear of companies you don't 
understand (fair enough) and don't aim for short term profits 
(actually Buffett does do some of this in short term arbitrage 
deals)."

"I don't invest for a year.  I'm looking out two, three years or 
more. (Buffett when investing looks at much longer time frames than 
that, typically 10 years out).   Sometime's I've been left behind 
when the market has all go-go stocks.  I've got sleepy things but 
usually they're paying dividends (Buffett's focus is on not getting 
dividends but reinvesting for compounding returns)."

What surprises me about these quotes is that Benjamin seems nothing 
like Buffett in his investment style. They could both be described as 
'fundamentalist investors' and both succcessful.  But clearly being a 
fundamentalist investor does not equate to being a Warren Buffett 
clone.



>
>
>i reckon if buffett was in the computing business, or gold mining
>business, or even if he used technical analysis for this investing
>methods,  he would still be as sucessful in that, as he is with
>berkshire hathaway.
>
>



Can you explain how Warren's skills as a fundamentalist investor 
would transfer to those other businesses?   You think the skills to 
do computer coding are equivalent to to understanding a business?  
You think Warren would be able to look into a gold mine and not only 
figure out what he could get out of it, but what he could sell the 
gold at 10-20 years down the track?   You think that in order to play 
market trends you need to understand all the fundamentals of a 
business?

You can reckon all you like Jerrold, but unless you can back up your 
argument you are unlikely to convince others.



>
> 
>anyway, that's the whole point of my initial post ... just to say
>that "fundamental investors" put too much faith in warren, and don't
>realise that he's rich for many reasons, and not just because he
>uses fundamental investing.
>
>




So you are saying there is no point in understanding Warren's 
methods because the odds are that even if you do, because of other 
factors, you won't be as rich as he is?   Better to just take the 
Brokers buy and sell recommendations, throw in a bit of T/A and 
forget about Warren?   What do you mean 'put too much faith in 
Warren'?

SNOOPY



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