Buffett article in this month's Atlantic

[jjlin]

Also a mention of Mohnish Pabrai. Available here:

 

http://www.theatlantic.com/doc/200909/warren-buffett

[mhdousa]

anyone else think that was just a terrible article?  i have no idea what was her point other than to say "I went to Omaha, met a few people, and took a couple notes that I'm throwing down on the page". 

[bbmd]

Actually I thought that article was one of the better articles I've read on Buffett and value investing. Maybe I was just noticing an issue that I feel is the most important reason WEB is a successful investor. Value investing, almost by definition, can be accomplished by using a formula...similiar to Greenblat's Magic Formula. Academic studies have shown that this method performs slightly better than just picking random stocks (which is like the returns from a total market index fund). However TRUE value investing is having accumulated so much knowledge over years, which includes reading everything in the news, every companys' annual reports, 10k's, 10q's, reading industry specific literature, knowing managers personally, and in general using a latticework of mental models...in order to actually be able to KNOW when a stock is truly undervalued. This of course is way, way, more compicated than sinply using a value formula.

 

Anyways, there was a whiff of this concept in the article. That's why I liked it.

[jjlin]

anyone else think that was just a terrible article?  i have no idea what was her point other than to say "I went to Omaha, met a few people, and took a couple notes that I'm throwing down on the page".  

 

I think the thesis (which granted isn't very well developed) is interesting, which is: what happens to those who claim to be value investors after the passing of its most famous (and more importantly, most successful) practitioner? As we all know, humans are social animals and having someone like Buffett around, who continues to do very well very publicly, is a hugely psychologically reassuring. What happens to them when he's gone?

 

I suspect what happens is that messageboards like these start to become more important as folks cast about to find social support  ;). As she points out, value investing is by definition contrarian, and a lonely path to tread.

 

 

[Parsad]

It will continue.  There are enough to carry the torch.  It may not have quite the brilliance, but it will continue.  Think about the NBA without Jordan.  It's still pretty amazing with Kobe, LeBron, Howard, Paul & Nowitzki.  It will be the same for value investing. 

 

People won't herd like they do in Omaha, but you will have maybe 10-15 other meetings that will get greater attendance because those managers will develop a stronger following.  Some of the other stalwarts will start to get bigger...Leucadia, Fairfax, Sears, Markel, etc.  And then some of the smaller ones will start to generate more interest...Biglari, Tilson, etc. 

 

The greatest player of them all may leave the playing field, but someone always comes along.  No one ever thought there would be another Jack Nicholas, but then 25 years later you've got Tiger Woods.  No one is truly ever bigger than the game itself.  Cheers!

[txlaw]

It seems unlikely that "value investing" will ever get completely thrown out the window after Buffett is gone because it's simply the concept of applying sound business principles to stock market investing.  There will always be "value investors" out there so long as there are people who apply their business knowledge to the stock market and assess potential investments based on the fundamentals.  Furthermore, there are many people who will learn about how to apply business fundamentals to the stock market by reading what Buffett has written or presented to the public and his shareholders.  Of course, what percentage of the general public will practice value investing is anybody's guess.

 

I've always thought the label of "value investing" gives the actual methodology/concept short shrift.  Ben Graham didn't invent value investing.  There have always been business people who practiced what we would call "value investing" except they were not doing so in the context of modern stock markets.  Graham and his pupils just applied sound business principles to stock market investing, adding in an additional requirement that there always be a "margin of safety" in every investment made. 

 

If I could go back and rename our style of stock market investing, I'd want to call it "business fundamentals-oriented" stock market investing.  Or, perhaps, "margin of safety" stock market investing.

 

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As an aside, I subscribe to an RSS feed from a website called Strange Maps that recently posted a map that probably resonates with a lot of value investors.  Some of you guys might get a kick out of the map: http://strangemaps.wordpress.com/2009/08/12/406-caruso-cant-touch-you-a-road-map-to-success/ .

[jjlin]

As an aside, I subscribe to an RSS feed from a website called Strange Maps that recently posted a map that probably resonates with a lot of value investors.  Some of you guys might get a kick out of the map: http://strangemaps.wordpress.com/2009/08/12/406-caruso-cant-touch-you-a-road-map-to-success/ .

 

That's a fantastic find. I'm going to print it out for sure and post it somewhere as a reminder -- for others, of course  ;D. Thanks for sharing!