Friday, August 22, 2008

Cult of Warren Buffett

Source from:
Robert P. Miles was in Malaysia for the first time to preach about the investment principles practised by the world’s richest man.
HAVING made his fortune largely through the stock market, Warren Buffet is widely regarded as the world’s greatest investor. Today, he is also the world’s richest man, with a net worth of more than US$62bil, according to Forbes magazine’s 2008 rankings.
Buffett’s success has garnered him a cult-like following among investment professionals and amateurs alike.
This is obvious at his shareholders’ meetings held each year on the first Saturday of May in his hometown of Omaha, Nebraska, in the United States.
Also, many books about Buffett have gone on to become international best-sellers.
“Besides his wealth and success, Buffett is also well known for his philanthropic work. He has taught his shareholders to not just focus on making wealth, but also on distributing it back to the world to help the needy,” says Robert P Miles.
Miles is among those who have written about Buffett. To date, Miles has three titles — 101 reasons to own the world’s greatest investment: Warren Buffett’s Berkshire Hathaway; The Warren Buffett CEO: Secret from the Berkshire Hathaway managers; and Warren Buffett wealth: Principles and practical methods used by the world’s greatest investor.
Tagged as a Warren Buffett expert, Miles has become a fixture on the international lecture circuit. He has spoken and conducted workshops in five continents, that is, Asia, Australia, North America, Europe and Africa.
Miles was in Malaysia for the first time last Tuesday to conduct a half-day seminar organised by the Malaysian Institute of Chartered Secretaries and Administrators.
BizWeek catches up with him to gain an insight into what he normally teaches and his opinions about Buffett.
BizWeek: You have travelled to many places conducting seminars. Last Tuesday was your first time doing it in Malaysia. Why was Malaysia never on your list before that?
Miles: Well, I never got invited to come to Malaysia to conduct seminars before this. My coming this time was under the invitation of a friend after I completed my tour of four Asian countries, namely, Vietnam, Thailand, Indonesia and Singapore.
What do you teach at your seminars?
I share my observations on Buffett, and my seminars focus on teaching people about his investment and management philosophies. I think he is a genius at both investing and managing.
Buffett is a living proof that it is indeed possible to become extraordinarily wealthy through an honourable way.
He has created wealth by owning businesses through the stock market. And he manages 220,000 employees at his enterprises, with only 19 stationed at his headquarters.
So, Buffett is an interesting case study, not only from the investment standpoint, but also from the management standpoint.
Who are your target audience?
Anyone who is interested in the stock market and in learning how Buffett manages his enterprises. They could range from professionals to individual investors and business students, among others.
The response around the world to the message of Buffett has been good because people are curious about him. They want to study somebody who is the best at investing and the best at managing.
What is your relationship with Buffett?
I am simply, first, a shareholder of his company, Berkshire Hathaway. I am not a spokesperson for the company, though. Neither am I on its payroll nor had Buffett instructed me to conduct seminars.
Secondly, I am an author of three books about Buffett. On my website, you will notice the focus is more on Buffett because it is really all about him. It is not about Robert Miles and how I invest. So, I try not to confuse the two. I am just an observer, a writer and speaker.
How did you develop the credibility you enjoy today of being a Warren Buffett expert?
I think credibility is earned, and people can tell whether or not you know your stuff.
I wrote my first book — 101 reasons to own Berkshire Hathaway – without any intention of publishing it. I started writing the contents of the book as a daily blog posting on fool.com over a period of 101 days.
When I finished, many people from all over the world wanted a compilation of my postings in a book. So, I self-published the book because I never thought publishers would be that interested in what I had written.
My book captured the attention of many soon after hitting the bookshelves because people found out that Buffett actually liked it. A publisher then picked up my book and published it in hardcover and paperback for foreign editions.
Following the success of the first book, I began to work on two other books on my own initiative because I was really passionate about Buffett’s philosophies.
How did you become familiar with the investment and management philosophies of Buffett?
Just by reading his letters, which are available free on his website. There are over 20 years of his letters to his shareholders (whom he regards as his partners) that pretty much explain his methods. Buffett writes to them as if they had been away from the business for a year.
How long have you been studying about Buffett?
For more than 10 years, since I became a shareholder in Berkshire Hathaway in 1995.
When did you begin to develop an interest in him?
When I began to ask myself the questions – who is the best at investing, what can I learn from him and is he available to manage money for me – back in the mid-1990s.
I found the answer in Buffett.
So, I began to invest in Berkshire Hathaway and started attending its annual shareholders’ meetings.
I got to learn so many new things from Buffett that I had never heard of from anyone else, such as: Wall Street will sell you anything that you want to buy; it is the legal pickpocket of the average investor; and it is the only place where people will go there in a Rolls Royce to get advice from people who have gone there by the subway. And I was so impressed.
Have you applied Buffett’s theories on yourself?
Yes, my income is mainly from my personal investments, not so much from my writing or speaking fees. I think one will lose his credibility if he does not make money by following the advice that he is preaching about.
Have you ever thought of just focusing on being a successful investor like Buffett?
My motivation is to share what I have discovered so that people can make up their own mind.
My job enables me to share my passion about Buffett, and by travelling, I get to experience other cultures and meet different people. I think you can learn more about yourself when you are given a comparison, not by being surrounded by people who are like yourself.
In a nutshell, what is Buffett’s way of investing?
It is figuring out what an investment is worth – what is its value – and attempting to buy it cheap. Most people confuse price with value, thinking if the stock price is US$25, then the stock must be worth US$25.
Buffett does not look at the price. He calculates the value, which is basically determined by earnings of an investment, and then figures out the best price to pay for the stock.
Then, he patiently waits for the market to offer him a much attractive price for his holdings.
Buffett strongly suggests that one should not be a stock trader if one has no interest in studying accounting and valuing a business, and does not understand market prices.
That person, according to Buffett, will be better off just buying a low-cost, low-tax, index fund, and dollar-cost average into it over his or her working life to enjoy reasonable returns.
What are the principles behind Buffett’s way of investing?
Buffett’s investing style is influenced by the methods that had been laid out by his college professor Benjamin Graham in a book called The Intelligent Investor. He learnt three important points from the book, which have helped him throughout his investing life. We can also apply them:
Firstly, we need to look at a stock as not just a list on the newspaper. It represents a share of a business. If we think that way, we will have an owner-mentality, rather than a trader-mentality. Then, we will think more about the value of the business, and not the price of it.
Secondly, we have to think that in the stock market, we have a virtual partner, whom Graham called Mr Market.
Every time the stock market opens, Mr Market is either manic or depressed. When he is manic, he wants you to buy his share of the business for twice as much to what you think the business is worth, so you should sell instead.
When he is depressed, he wants to sell you his share of the business for half of what it worth, so you should buy instead. What most people do wrong is they treat Mr Market as their master and follow his mood. But Buffett uses Mr Market as his servant, and does the opposite of what Mr Market wants.
Thirdly, we need a margin of safety, which is the difference between the value and price of an investment. The lower the price of a stock from your valuation, the more margin of safety you have.
Therefore, Buffett likes declining markets because he can get more margin of safety from such markets. In bull markets, however, Buffett will wait patiently on the sidelines.
How can one learn to be an intelligent investor like Buffett?
The stock market is a place where emotions run high as shares are being auctioned off to the highest bidder.
Emotions come into play all the time because people want to win. So they either push up or push down the prices of shares. Many therefore confuse price with value, and could not make the best investment decision.
An intelligent investor is one who is rational. Buffett is a very rational investor because he has learnt to master his emotions.
posted by paymedollar at

1 Comments:

Anonymous seminars on the stock market said...

Buffett is a very wise man and there are many of them out there that just haven't had as much time to grow their assets.

August 24, 2008 at 9:27 PM  

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