Dan Sweet

Warren Buffett on the best investments for young investors now? (12 of 12)

This is the final post in a series of twelve posts. The introduction to the series is here. By way of review, these are my notes of Warren Buffett’s responses to questions from Notre Dame and Stanford MBAs on October 9. 2007.

What do you see as the best investments for young investors now?

Do the internet equivalent of what I did with Moody’s books.  I found 15-20 companies in an afternoon looking through a 2004 guide to Korean companies published by Citi.

Example: Dehan Flour Company.  Earnings of 12k historically and 18k most recently.  200k book  value with 100k in marketable securities.  Selling for 38k won.  (2x earnings!)

Look for good fundamental businesses.  Selling for 2-3x earnings.  As long as you choose companies with great balance sheets you can’t lose.  In the U.S. I’d just choose 2-3 companies.  In emerging markets I’d probably diversify a little more.  A 5x return in 3 years would be doable.

Read Graham’s Chapter 8 of The Intelligent Investor on Mr. Market.  The market is the best place to make a lot of money without being very smart—and that’s what I was looking for.  If you bought a farm for $600 an acre you wouldn’t get upset if another farm sells for $550 an acre.  The farm doesn’t know what I paid for it.  Mr. Market is the best partner to have.  He’s psychotic, he’s drunk.  Sometimes its ridiculous.

The idea that the market is there to serve you and not to instruct you is the most important idea to keep in mind.

Liquidity should not suck you in.  Ask yourself, “would I be happy with this purchase if they closed the market tomorrow for two years?”

What you need is the right business, run by the right people, at the right price.

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Warren Buffett recommends going all-in. (3 of 12)

This is the third in a series of twelve posts. The introduction to the series is here.
By way of review, these are my notes of Warren Buffett’s responses to questions from Notre Dame and Stanford MBAs on October 9. 2007.

Can you comment on the challenge presented by Berkshire’s size?

Can’t compound like we used to.

Before, I went through all of Moody’s ten thousand pages.

Page 1433, Western Insurance Securities, earnings of $20-$30/share, low/high stock price $3-$13.

Can change net worth by 3-4x in 1-2 years by going all in on something good.

Atled Corp – delta spelled backwards – found it in the Oil & Gas Journal at the public library.

$20,000 in treasuries per share

Total A/P $189

Furniture and Fixtures $41 (I knew this was my kind of business.)

$10,000 per share in royalties

Bought 1 share for $29,000

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