Tag Archives: Warren Buffett

October 11, 2010 · 12:33 pm

The Snowball, Warren Buffett bio (book review)

Last Christmas, my brother gave me “The Snowball: Warren Buffett and the Business of Life“, by Alice Schroeder. He completely hit on the spot, though I only started reading it during last August holidays (Luca also started reading it to the point that she ended up buying her own Kindle version of it!).

The book is a thorough review of Buffett’s life, including relationships with family & friends and investment decisions. I had previously read other books about Buffett, but they were merely about his investment “strategy” so to say, nothing compared to this one. To complete the book, the author made over 250 interviews, so you can imagine the many insights contained in it.

There are many lessons or just ideas that can be taken from this book. Let me just point the few I can recall at the moment of writing this post:

  • The Inner Scorecard: the idea of acting and valuing yourself according to what you care about and not according to what others’ deem important.
  • The concept of margin of safety: from Benjamin Graham (recommended reading “The Intelligent Investor“).
  • Circle of competence: the idea of looking for simple business that have an enduring competitive advantage (technology companies are not that simple).
  • Cigar butts: companies which are worth more “death than alive” (looking for cheap price to book).
  • Snowball: the idea that compounding interest acts as a snowball falling down the hill, the sooner you start the larger the ball will be down the road (thinking about retirement here).
  • The story of the genie: or that you should invest in your own health as your body is the only one you are going to be given in this life.
  • The Ovarian lottery and the idea that philanthropy achieves more if exercised now and trying to maximize its impact.

Throughout the book you get to learn about many great entrepreneurial characters (e.g. Rose Blumkin, Bill Gates); about the workings of the board of directors of some companies (e.g. Coca Cola, Berkshire Hathaway); about some of the most impressive falls in corporate history (e.g. Solomon Brothers, Long Term Capital Management); about several depressions, recessions and crisis; and above all you learn about what were the thoughts and calculations behind some of Buffett’s investments decisions since the early 1940’s to date.

I definitely recommend this book (700+ pgs.).

5 Comments

Filed under Books, Investing

Tagged as , , , , , , , , , , , , , , , , , , , ,

May 15, 2010 · 11:00 am

Starting up an airline?

Some days ago I came across a post in the blog of Randy Tinseth, VP Marketing  for Boeing Commercial Airplanes, where he explains the concept of StartupBoeing and invites entrepreneurs to take up the opportunity. StartupBoeing is a website which offers information to entrepreneurs in order to help them build their business plan or run their operations. As it is stated in the web itself:

“The StartupBoeing team assists entrepreneurs in launching new airlines. From concept through launch, StartupBoeing offers guidance, review, analysis, data, resources, contacts, and referrals to qualified startup airlines.”

The first thing I thought was “yes, there is the opportunity to lose your investment”. To be fair, Tinseth points at different moments the difficulty of the business and that it is tough to start-up an airline. Airbus does also have the same concept available to entrepreneurs, in this case is called: Start Me Up.

I looked for the last industry outlook from the International Air Transport Association (IATA), the industry association. The figures are appalling (see the table below):

IATA Financial results of the last decade.

Airlines around the world have lost during the last decade 50 billion dollars, with only 2 out of ten years with profits. On average the net profit, loss in this case, was -1.4% of the revenues (over 4 trillion dollars in the decade). Of course, there are airlines making profits, but the industry is not doing well (just remember the last achievements of G. Díaz Ferrán).

I then remembered this other comment from Warren Buffet about the airline industry since its inception:

“I made the comment that if a capitalist had been present at Kittyhawk back in the early 1900s, he should have shot Orville Wright. He would have saved his progeny money.

But seriously, the airline business has been extraordinary. It has eaten up capital over the past century like almost no other business because people seem to keep coming back to it and putting fresh money in.

You’ve got huge fixed costs, you’ve got strong labour unions and you’ve got commodity pricing. That is not a great recipe for success.

I have an 800 (free call) number now that I call if I get the urge to buy an airline stock. I call at two in the morning and I say: “My name is Warren and I’m an aeroholic.” And then they talk me down.”

So, yes, if you are considering whether to start-up an airline, do yourself a favour: call that 800 number, and put your cash somewhere else where it returns more than -1.4%…

The one thing we should definitely praise from these initiatives is the information resources available to the general public, something commented by readers of Randy’s blog and a purpose expressed in the Startup website as well:

“StartupBoeing.com also has a wider purpose as a resource to pass on information to our customers – and also as a resource for existing airlines, financial institutions, consultants and the leasing community. It’s a place for neutral industry data. We want to help make the industry healthy and make airlines safe, reliable and profitable.”

1 Comment

Filed under Aerospace & Defence, Investing, Marketing

Tagged as , , , , , , , , ,

April 26, 2010 · 12:00 pm

Value investor: Joel Greenblatt

Last week, I watched an online interview by Steve Forbes to Joel Greenblatt, a value investor, author of the book: “The Little Book That Beats the Market”.

I read this book about two or three years ago and I remember it as a very enjoyable read (just about 150-200 pages). He proposes a formula to automate the stock picking process that would result from applying value investing principles by a person that doesn’t want to get too much involved.

During much of the interview he discusses how they have tested the formula, how it beat the market in this and that time, etc…

Summarizing, he admits that he based the formula in:

  • From Benjamin Graham: buying cheap.
  • From Warren Buffet: not only buying cheap, but buying a good company.
  • Last but not least: you need long periods of time, thus, patience.

This last requirement is what most speculators (vs. investors) lack of.

If you are interested in the formula, you may use it for free in his website.

Nevertheless, if I were you I wouldn’t stop there, but read “The Intelligent Investor” (especially chapters 8, 14 & 20)… the sooner, the better.

To my friends: if you are interested in Greenblatt’s book, I also got it, if you want to borrow it…

1 Comment

Filed under Books, Investing

Tagged as , , , , ,

March 1, 2010 · 1:45 am

Not just another letter

Last Saturday Warren Buffet’s letter to the shareholders of Berkshire Hathaway was released.

I encourage you to read it. In the best case it will raise some interest for this guy within you, and that may be translated in further readings and wiser investments decisions. If it doesn’t go that far, it’ll provide some fun reading. Let me give you some hints of this year’s letter:

“An old Wall Street joke gets close to our experience:

  • Customer: Thanks for putting me in XYZ stock at 5. I hear it’s up to 18.
  • Broker: Yes, and that’s just the beginning. In fact, the company is doing so well now, that it’s an even better buy at 18 than it was when you made your purchase.
  • Customer: Damn, I knew I should have waited.”

“If Charlie, I and Ajit are ever in a sinking boat – and you can only save one of us – swim to Ajit.”

“GEICO’s managers, it should be emphasized, were never enthusiastic about my idea. They warned me that instead of getting the cream of GEICO’s customers we would get the – – – – – well, let’s call it the non-cream. I subtly indicated that I was older and wiser.

I was just older.”

“It’s clear that I failed you in letting NetJets descend into this condition. But, luckily, I have been bailed out.”

“Big opportunities come infrequently. When it’s raining gold, reach for a bucket, not a thimble.”

“Charlie and I enjoy issuing Berkshire stock about as much as we relish prepping for a colonoscopy.”

“If you decide to leave during the day’s question periods, please do so while Charlie is talking. (Act fast; he can be terse.)”

“If pushed, we would gladly pay substantial sums to have our jobs (but don’t tell the Comp Committee).”

It’s only 19 pages…

5 Comments

Filed under Investing

Tagged as , , ,