Warren Buffett's Principles and Practical Methods

I just attended "Warren Buffett Wealth: Principles and Practical Methods Used By the World's Greatest Investor" by Robert P. Miles at "INVEST Fair'08 Program 17 August 2008, Sunday" in Singapore.

Here are some of the pointers shared by the speakers;

Market Price - is similar to "Price of college education."

Book Value - is similar to "Price of college plus lost of earnings."

Intrinsic Value - is similar to "Present value of college education earnings over non-college earnings." or "Stream of earnings discounted to present value."

You should buy Berkshire Hathaway when it is 1.5 times of its book value.

Warren's largest holdings in terms of sector are;
Banking - Wells Fargo
Man-shaving - Gillette (Procter & Gamble)
Beverages - Coca Cola
Credit Card - American Express

To understand more about Warren Buffett style of investment and how he value those companies in his portfolio, you should read "Intelligent Investor by Benjamin Graham"

Three things any readers can take away from reading this book are;
1. Stock is actually a share of a business.
2. Concept of Mr. Market (Be fearful when Mr. Market is greedy; Be greedy when Mr.Market is fearful)
3. Margin of safety.

Every investors should know the following two things;
1. How to value a business.
2. How to think about market price.

The most important thing to learn in the study of accounting;
1. Compound interest
2. Present value and Future value
3. Inflation
4. Different between price and value
5. Read and understand annual reports

Warren's advice to investor - "Know what you own and investigate what you own."

Warren's said to dotcom investors in year 2000 - " As long as they know what they own, they'll be ok."

Don't confuse between market price and value.

On the average, the ownership of Nasdaq companies is 6 months, the ownership for NYSE companies is 12 months, whereas for the ownership of Berkshire Hathaway is +20years.

Warren Buffett's wisdom - "Our favourite holdings period is forever."

More on Warren Buffett's wisdom;
1. Research and buy based on value.
2. Know what you own.
3. Ignore the madness of the crowd.
4. Work with different stocks in different industry, and in different countries.
5. Small portfolio have advantage.

The differents between what market thinks and what Buffett thinks are;

Market---------------Buffett
Crowd---------------- Individual
Emotional------------ Intelligent
Prices---------------- Value
Diversification-------- Concentration
Speculators----------- Owner
Traitor--------------- Loyalist
Trading-------------- Reading
Six months----------- Lifetime