Wednesday, December 28, 2005

Warren's investment process

  • In the past some things were cheap enough WB could decide in a day (this was somewhat a function of a time period where companies would sell at 2-3x earnings)
  • Decisions should be obvious to onlookers. You should be able to explain why you bought something in a paragraph.
  • "I don't do DCF" (WB says he does a rough approximation in his mind)
  • Finding ideas is a function of cumulative knowledge over time. Something just comes along - usually an event takes place, like a good management team screwing up - that creates the opportunity (WB seems to imply here that his reading isn't specifically targeted at finding ideas, but rather that ideas jump out at him as a natural consequence of vociferous reading)
  • You must be patient...good ideas tend to be clustered together, and may not come at even time intervals...when you don't find anything for a while it can be irritating
  • WB isn't bothered by missing something outside his circle of competence
  • Missing things inside the circle is nerve racking...examples include WMT, FNM


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