Over the weekend, on 8th September 2012, I had the chance to meet Mary Buffett and listen to her talk about value investing at the Asian Value Investing Conference 2012. Thanks to my friend, Sean Seah, that I got a free Gold ticket to the event (lunch was provided as well!). Both Sean Seah and Mary Buffett shared the stage to espouse the theories of value investing. I feel listening and reading about value investing over-and-over again, even though it may seem like basics, help to reinforce the ideas and make sure one is on the right path. There were also other speakers who spoke about Real Estate Investment Trusts, Exchange Traded Funds, Creating an Investment Portfolio and Market Cycles. However, the main highlight was still Mary Buffett.
I will summarise what was covered by Sean Seah and Mary Buffett below:
- Be a business collector and realise there is a business behind the stock price.
- To know which businesses to invest in, determine where your money comes in from and where do you spend money on. This will define your circle of competence. Always invest within your circle of competence.
- Invest in companies with a durable/sustainable competitive advantage.
- Look for consistency of earnings without gyrations.
- Predictable products mean predictable profits.
- Old companies are durable and most have low Research & Development expenses. Think Coca-Cola and Wrigley.
- Buy companies which sell a unique product or service, have been around for a long time and at the right price.
- Invest in companies that have pricing power and can increase the price with inflation.
- Commodity businesses are businesses that are price-oriented. Examples will be airline companies, gasoline companies and car companies. When Warren was asked how to be a millionaire, he jokingly said, “Be a billionaire and buy an airline company”.
- The opposite of a commodity business is a consumer monopoly.
- Be patient. When stocks are overvalued, research into the companies you want to buy and write the names on a “shopping list”. Wait patiently for a correction. Warren sat on cash for four years from 1969 to 1973 as he had nothing to buy. In 1973, when there was a market crash, he put the cash to use and quadrupled the money.
Mary Buffett also shared “Ten Ways to Get Rich”. They are:
- Reinvest your profits
- Be willing to be different
- Never suck your thumb
- Spell out the deal before you start
- Watch small expenses
- Limit what you borrow
- Be persistent
- Know when to quit
- Assess the risk
- Know what success really means
Also, do check out Sean’s latest book, “Gone Fishing with Buffett”, which teaches readers on how to be a successful business collector. The book is useful for beginners who want to start value investing. Besides being a simple read, it is written in a conversational form, making it interesting to read too. (No, I was not paid to promote this book. I feel that this book is worth recommending.)
Lastly, some pictures below from the conference for your viewing pleasure: