Warren Buffett First TV Interview

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This Video was doing the rounds on Twitter recently and is merely 7.5 minutes long but in that time the wisdom that Warren Buff puts out is pretty remarkable:

https://www.youtube.com/watch?v=T6HHwOoq9M4

I have watched this a few times (I recommend Readers do likewise) and many of the usual lines Warren trots out are repeated here but they are without doubt bang on the money and if we take these principles on board then that is going to put us in good stead. The following points from this remarkably short Interview stand out to me:

• He starts off with the usual “Don’t lose Money, and don’t forget the first Rule” line - and I’m not sure I find that particularly useful but he then goes on to say that if you buy a group of Companies where their Value is well above the Price the Stockmarket is selling them for, then “you cannot fail to make money”. I totally buy into this idea - I often say that among my Stocks I never know which ones will do really well in a given year but I can be pretty confident that over time my Basket of Stocks will deliver the goods if I am patient. I put a lot of emphasis on the Valuation aspect and I think it is hugely beneficial in 2 ways - firstly it keeps you from buying stuff that is simply overpriced and risen too far and secondly it you focus on Value then the upside can be significant if you are patient enough to let it run.

• He then talks about how you don’t need to be Super Intelligent to make money in the Stockmarkets (phew, that’s a bit of luck for us then !!), but what does help is a “stable personality” and that we must have a “temperament that neither gains pleasure from being with the crowd or against the crowd” and he goes on to say that this is not a Poll and/or a Popularity contest (This plays into the Ben Graham saying - “Over the Short Term the Stockmarket is a Voting Machine, whereas over the Long Term it is a Weighing Machine“. It is about analysing Companies and assessing what their Value is and then buying them at a Price which gives attractive upside potential. This plays into the idea of being Calm, Robotic and Mr Spock like - it doesn’t help to be all emotional and to get over excited or over fearful. Stay on an Even Keel.

 

• A common mistake People make is not thinking that they are buying part of a business. The Ticker just tells you the Price of the Stock but tells you nothing else about the Company (ok, Chartists would argue that the Chart does convey information [and to an extent I agree with this] but there are obviously many times where the Value of a Company and its Price Chart have a massive disconnect). He goes on to say that in many ways it would be better to analyse the Company first using the Information out in the Public domain like Annual Reports and suchlike and only once you have assessed its Value do you then look to see what Price it is. That way the Price of the Stock does not affect your Judgement. This is the classic ‘Price vs. Value’ debate and I really like what he is saying here. This also plays into the idea that your psychology and how you form an opinion on a Stock and its Value can be easily influenced by factors such as the Price and usually it is subconscious and you cannot avoid such subtle psychological factors.

 

• He then addresses the subject of Noise although he doesn’t use that word directly. He makes the point that when he is miles and miles away from Wall Street in Omaha, Nebraska, he doesn’t get all the People coming to him and whispering in his ear with great Stock Ideas and reasons why such and such a Stock will go up etc. He is away from all ‘the action’ and can analyse Companies thoughtfully and calmly without all the distractions and can focus on what the Company is really worth.  In Wall Street people get “over stimulated” - Classic ‘Cut out the Noise’ stuff. Think about how this relates to Twitter and Bulletin Boards etc. - you can constantly bombarded with Stocks that offer amazing potential.

 

• He trots out the usual Line that he has never bought a Tech Stock, “because I don’t understand it”. Again this is so basic and so obvious but it is utterly superb advice - if you don’t understand a Company and particularly what it does and how it is going to make Money, then don’t even dream of buying the Stock and walk away. I am sure a huge number of people make this error - or perhaps they think they understand a Stock whereas in truth they don’t. This definitely applies to all that Mining Junk that people get sucked in by - I doubt may Buyers have much understanding of just how complex, difficult and above all expensive, Mining is. By the way, Buffett has since bought a few Tech Stocks but no doubt he will be paying a lot of attention to their Numbers !!

 

• I love the next bit. This is the old one where he draws the analogy with Baseball where in the real-life Game the Pitcher throws the Ball at you and I think you get something like three chances to swing your Bat and whack the thing to the Fences (it‘s just Rounders really, you know, that silly Kids game…). If you don’t do this, then you lose the chance to face more Balls. With the Stockmarket it is totally different - this time the Market Pitches Balls at you endlessly and you can just wait on the Plate and let the Balls whizz past you until you see one that absolutely fits what you are after and then you Swing the Bat with all your Might and Smash the Ball out of the Park. This is so important - you don’t have to take every Trade that the Stockmarket offers you - stay calm, be composed, be patient and wait for the gentle Pitches that you can smash the hell out of. This fully lines up with my latest thinking whereby my focus now when it comes to buying Stocks (at the moment I am biding my time as with Brexit and stuff the Risks are high and I am sitting on Cash), I am being extremely patient and I will be highly selective about what I buy next and I really want to buy Quality Stocks which I can most likely still be holding in a few Years when they are likely to be much higher in Price.

 

• The final bit I noted was about Simplicity and again Warren is spot on here. So much information is totally irrelevant and unimportant. He makes a superb point that if you were buying a whole Business, then you wouldn’t care if it was a Tuesday or a Friday - you would just Buy the Company once you were happy with the Value and the Terms & Conditions and stuff. So why do we obsess about the wiggles of the Price from day to day when we are buying a Stock? We are buying Part of a Business so why should it be any different? OK, I will concede on this one that I do think it is worth trying to read the Charts to get your timing a little better if you can but the point is valid that if you are buying a Stock in a Great Company which you think is considerably undervalued then it doesn’t really make a huge difference whether or not you get it a few Percent Cheaper or not - in a few Years when you sell it for multiples of your Buy Price it will be trivia and totally forgotten. I look at it like this - if you and a Mate buy a Stock around the same time and Sell it a while later for 428p, neither of you will even remotely remember that he got the Stock for 87p whereas you paid 95p.

Anyway, I hope you like the Video and you take time to think about it and relate it to how you do things. In basic terms, I guess much of what Warren Buffett says here can be boiled down to Keep it Simple, Stay Calm and cut out the Noise.

Cheers, WD.


Related Blogs
These Valuation ones are so important - get your head around how to Value a Stock and it puts you far ahead of most Investors/Traders (scroll to the bottom for Links to the other Bits):

http://wheeliedealer.weebly.com/educational-blogs/valuation-valuation-valuation-bursting-for-a-pe-part-4-of-4

Of course this one is highly relevant as it’s all about Price Vs Value:

http://wheeliedealer.weebly.com/educational-blogs/price-vs-value-think-like-an-owner-part-2-of-2

Robbie’s ‘Trade like a Shark’ book review covers many of the subject areas in this Blog on Buffett:

http://wheeliedealer.weebly.com/educational-blogs/invest-like-a-shark-part-3-of-3

This ones about Cutting out the Noise - scroll to the bottom for Links to the earlier Parts:

http://wheeliedealer.weebly.com/educational-blogs/enjoy-the-silence-cut-out-the-noise-part-3-of-3