The biggest value investing name today is Warren Buffett. He didn’t get his Oracle of Omaha moniker from being average. So, when I have the opportunity to learn even a little bit from someone who’s been successfully investing for over 60 years, I take it.
The value investors journey to Mecca, the Berkshire Hathaway annual meeting, was this past weekend. Anytime the event rolls around, the value investing blogs usually unleash a few hidden gems.
One of those gems was an interview Warren Buffett did back in March for the MBA program at the University of Western Ontario, through the Ben Graham Centre for Value Investing. For an MBA student, it’s a rare opportunity to pick Buffett’s brain. Thankfully, they took notes to share with the rest of us.
I’ve highlighted just a few of the interesting topics of discussion or you can jump to the bottom and follow the link to read the full transcript.
On Value Investing
What I seek is certainty about the pay-off, make sure there are two in the bush.
The way I deal with certainty is to find companies that have historically great
returns and earnings, leveraging on a competitive advantage.
On Pricing Power
See’s Candies was a business where we had pricing power. Our product was
often used as a special treat or gift for a moment. The first time I bought See’s
I gave it to my future wife and got a kiss. After that, they had me for life.
That’s because See’s is a product that provides happiness. On, Valentines
Day, do you really care if a box costs $4 or $5? You cannot go home to your
wife and tell her you got the cheap chocolates. Consumers also are not
conscious of pricing one year to the next. Candy used to sell for 1.95/pound
when I was young. Today it sells for $16.00/pound. See’s would always raise
their prices on December 26th. I bought this business when it had $4M in
sales. Today it is $83M. That’s pricing power.
On Finding Opportunity
On my honeymoon I travelled out west. When I visited the casino and saw all
these smart well-dressed people participating in a game with the odds against
them, it was then that I realized I won’t have a problem getting rich!
On Information Access
People have better information now, but they still act irrationally.
Overall Investing Strategy
Invest in equities slowly over time. And invest in yourself. Enhance your own
talents and weaknesses. Specifically oral and written communication skills.
And look to buy companies that will go on forever, like CocaCola. But the key
is to buy equities slowly over time, and don’t try to time the market. For the
more serious investor, buy equities strategically, opportunistically.
I always say buy what you know, and focus on your circle of competence. It
doesn’t matter how big the circle is, but you have to know the perimeter.
You can take Warren Buffett’s views as gospel, guidelines, opinions or useless drivel. Regardless, it’s an interesting rundown on his value investing approach, views on the economy, education, occupy movement, life lessons and more. Whatever your impression, take the time to read through the Ivey School of Business meeting with Warren Buffett (March 30, 2012 Buffett interview for .PDF).