Buffett: Financial companies are more difficult to analyze than other companies. They can report whatever earnings they want – it’s an easy game to play. For banks, earnings depend on loans and the reserves set aside. It’s easy to change and manipulate the reserves. With a company like WD-40 or a brick company, the financials […]
Buffett and See’s Candies
Question: How do you determine what is the proper price to pay for the business? Buffett: It is a tough thing to decide but I don’t want to buy into any business I am not terribly sure of. So if I am terribly sure of it, it probably won’t offer incredible returns. Why should something […]
What types of businesses have the highest ROIC
Question: What types of businesses have the highest ROIC? Buffett: You could run Coca-Cola with no capital. There are a number of businesses that operate on negative capital. Great magazines operate with negative capital. Subscriptions are paid upfront, they have limited fixed investments. There are certain businesses like this. Blue Chip Stamps – it got […]
Buffett: Avoid Bad Businesses
Question: What businesses should we avoid? Buffett: In the textile industry, we always had new machinery that held the promise of increasing our profit, but it never did because everyone else bought the same machinery. It was sort of like being in a crowd, and everyone stands on tip-toes – your view doesn’t improve, but […]
Buffett on Capital-intensive Businesses
Question: Would you comment on the quality of earnings in capital-intensive businesses, like utilities? Buffett: Capital-intensive industries outside the utility sector scare me more. We get decent returns on equity. You won’t get rich, but you won’t go broke either. You are better off in businesses that are not capital intensive. Munger: A lot of […]
Buffett: Consumer Products and Share of Mind
Question: Could you explain a little more about the mind of the consumer and the nature of the product? And explain how you actually apply these concepts to find the companies with the best potential? Buffett: When you get into consumer products, you’re really interested in thinking about what is in the mind of how […]
Buffett on Value vs Growth Investing
Question: What is the definition of Value vs. Growth stocks? Warren Buffett: No two distinct categories of business. PV of cash a company generates is what the business is worth. No distinction in our mind between growth & value. All decision you decide how much value you are going to get. When we buy a […]
Buffett: What are the Best Companies to Invest
Question: What is the ideal business? Buffett: The ideal business is one that generates very high returns on capital and can invest that capital back into the business at equally high rates. Imagine a $100 million business that earns 20% in one year, reinvests the $20 million profit and in the next year earns 20% […]
Buffett: The Importance of Management
Cap Cities vs. CBS I put one business in here, CBS versus Cap Cities in 1957, when my friend Tom Murphy took over Cap Cities. They had a little bankrupt UHF station in Albany. They ran it out of a home for retired nuns. And it was very appropriate because they had to pray every […]
Buffett on Diversification
The following article is an excerpt from Buffett Partnership Letters, January 20, 1966 Last year in commenting on the inability of the overwhelming majority of investment managers to achieve performance superior to that of pure chance, I ascribed it primarily to the product of: “(1) group decisions – my perhaps jaundiced view is that it […]
Buffett on Stock Market Risk
Question: Could you give us your definition of stock market risk Warren Buffett: We think first in terms of business risk. The key to Graham’s approach to investing is not thinking of stocks as stocks or part of the stock market. Stocks are part of a business. People in this room own a piece of […]
Does Buffett Hold Stocks Forever
Short-term investment, long-term investment or hold stocks forever? Buffett tells us how he did it. Question: Why would you hold stocks forever, if the fundamentals change permanently? (Buy and hold) Buffett: We don’t—we sell plenty. If we lose confidence or conditions change, we sell. When in doubt, we keep holding. But for [our wholly-owned] companies, […]