{"id":448028,"date":"2010-03-19T13:19:00","date_gmt":"2010-03-19T17:19:00","guid":{"rendered":"tag:blogger.com,1999:blog-3087194156628161158.post-1389008294620294108"},"modified":"2010-03-19T13:23:02","modified_gmt":"2010-03-19T17:23:02","slug":"sydney-morning-herald-buffett-investment-style-has-the-market-cornered","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/448028","title":{"rendered":"SYDNEY MORNING HERALD: Buffett investment style has the market cornered"},"content":{"rendered":"

MARCUS PADLEY, March 20, 2010<\/cite><\/p>\n

I LOVE the ”Warren Buffett Way”. One of my first clients introduced himself by saying: “I am Fred and I’d like to invest the Warren Buffett Way.”<\/p>\n

So what shall we do? Go out and get the reports of the top 200 companies. Analyse the profit and loss and balance sheets of each one, accurately assess “value”, then go out into the stockmarket and discover: “Wow. I’m right and the whole market is wrong.” And that the share price is trading below true “value”. Then buy the shares and wait for that value to inevitably emerge.<\/p>\n

Correct, but hardly realistic. The Warren Buffett Way, and the way investors and advisers have skimmed the surface and pretended to apply his methods, has cost the average investor more money than it has ever made them. No problem with Warren Buffett himself; the problem is the popular delusion that we can and should do what he does, or at least has done in the past.<\/p>\n

There is hardly a man in the street who does not quote Warren Buffett-isms and hardly an adviser who does not claim an empathy with his investment style.<\/p>\n

The truth is that there is only one Warren Buffett and only one person in the world who has his skill, patience, money, well-earned advantages and dedication to the task.<\/p>\n

But the rest of us? To think we can assess the Foster’s profit-and-loss account between packing four school lunches and holding down a job is delusional, as is the marketing of the idea that someone who is not Warren Buffett can emulate him and his success on our behalf.<\/p>\n

Seriously, if it were possible to imitate the Warren Buffett Way and transplant Buffett’s judgment into another fund manager, wouldn’t we know about it? Wouldn’t his fund be the highest-returning fund in the market? But there is no such fund manager and no such fund, because being Warren Buffett and exercising his judgment is not even very hard, it’s impossible, because so many elements of his analysis are so subjective.<\/p>\n

Getting stocks right is a very personal thing and I’m afraid if you really want Warren Buffett to be your adviser or your fund manager, there is no alternative but to ring him.<\/p>\n

Everyone makes a fortune out of Buffett and I know from experience that it works in our industry to align yourself with his success in the pursuit of more sales, clients and funds.<\/p>\n

But the truth is that apart from the fact that these products have Buckley’s chance of delivering the same success, these services are also conveniently inoculating themselves from responsibility for the products’ performance, because the Warren Buffett Way relies on such a long-term, patient approach.<\/p>\n

This negates the need for them to perform or be judged until much later, after you have paid.<\/p>\n

Most Buffett-based approaches are terrible at timing, which in reality is about the only thing that really matters.<\/p>\n

In an increasingly impatient market, it is not just about “what”, it is becoming all about “when”. Investors who sat through the 54.5 per cent market fall in the crisis need to earn 113 per cent to get their money back. That’s 13 years of compounding average annual returns. Not caring about “when” just cost us 13 years.<\/p>\n

There are only two ways to make money out of Buffett: buy shares in Berkshire Hathaway, or write a book about him. There are close to 50 of those and he hasn’t written one of them.<\/p>\n

On that basis, Buffett himself is hardly to blame for all this hoopla. If there is any blame at all it is ours, for skimming the surface of the biggest investment success story in the world in order to commercialise it.<\/p>\n

There is no Warren Buffett Way for other investors. There is just picking stocks that go up in price and to do that you would be well advised to rely on you, just you, with your understanding, your time horizons, your risk profile and your expectations. Not Warren’s. Forget Buffett. You are not Buffett. You are you. Rely on that.<\/p>\n

Marcus Padley is a stockbroker with Patersons Securities and the author of the daily stockmarket newsletter Marcus Today. For a free trial, go to <\/em>www.marcustoday.com.au<\/em><\/a><\/p>\n

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