By Sam Ro
1. You don’t need to be an expert in order to achieve satisfactory investment returns...
2. Focus on the future productivity of the asset you are considering..
3. If you instead focus on the prospective price change of a contemplated purchase, you are speculating..
4. Games are won by players who focus on the playing field – not by those whose eyes are glued to the scoreboard...
5. Forming macro opinions or listening to the macro or market predictions of others is a waste of time...
6. What the economy, interest rates, or the stock market might do in the years immediately following.. was of no importance..."
8. Buffett Isn't Perfect:
"A few, however, have very poor returns, a result of some serious
mistakes I made in my job of capital allocation. I was not misled: I
simply was wrong in my evaluation of the economic dynamics of the
company or the industry in which it operated. Fortunately, my blunders
usually involved relatively small acquisitions. Our large buys have
generally worked out well and, in a few cases, more than well. I have
not, however, made my last mistake in purchasing either businesses or
stocks. Not everything works out as planned..."
9. ...Like That Time He Lost $873 Million:
"Most of you have never heard of Energy Future Holdings. Consider
yourselves lucky; I certainly wish I hadn’t. The company was formed in
2007 to effect a giant leveraged buyout of electric utility assets in
Texas. The equity owners put up $8 billion and borrowed a massive amount
in addition. About $2 billion of the debt was purchased by Berkshire,
pursuant to a decision I made without consulting with Charlie. That was a
big mistake. Unless natural gas prices soar, EFH will almost certainly
file for bankruptcy in 2014. Last year, we sold our holdings for $259
million. While owning the bonds, we received $837 million in cash
interest. Overall, therefore, we suffered a pre-tax loss of $873
million. Next time I’ll call Charlie."
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