

Warren Buffet: How to Minimize Investment Returns - smanek
http://www.wallstraits.com/main/viewarticle.php?id=1373

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steveplace
This subject is a serious hobby (approaching business) of mine so I'll
comment.

Warren Buffet is an investor, namely a value investor. And he does very well
with his strategies. But there are other more speculative strategies that work
and do provide greater annual returns than his company.

The returns for certain strategies, however, diminish when you increase your
capital for a certain strategy.

There is a difference between what he does and financial speculation. W.B.
actively goes out to seek and _create_ value, whereas speculators are
scalpers, not actually creating value but by exploiting market inefficiencies.

There is also a difference between the value of a company and the supply and
demand of the stock of that company. W.B. follows the former with the
expectation that the latter will follow (it most often does).

His last paragraph is probably the most interesting in this essay. It shows
that past returns are certainly not indicative of the future. My guess is that
U.S. domestic equities will not have the greatest return as a securities class
for a while.

See:
[http://bespokeinvest.typepad.com/bespoke/2008/06/shrinking-u...](http://bespokeinvest.typepad.com/bespoke/2008/06/shrinking-
usa.html)

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gscott
Reading your comment, it made me think of Yahoo! and the "value" that is in
Yahoo! but just isn't seen in it's stock price. Warren Buffet should buy
Yahoo! and turn it into the company it should already be but for some reason,
isn't.

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steveplace
W.B. refuses to invest in internet companies. He feels that they are
overvalued.

And there is a difference between stock price and the value of a company. Of
course, I also believe that the efficient market hypothesis is bullshit.

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byrneseyeview
I though the argued that they were hard to understand, not intrinsically worth
less than the price at which he could buy them.

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andrewparker
Isn't this the pot calling the kettle black? Warren Buffet manages money on
behalf of his investors via his investment vehicle: Berkshire Hathaway. He is
a "Helper." Granted, he's a giant leap above the hedge fund world zero-sum
game. But, he's still a stock picking "Helper."

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nostrademons
His incentive structure is different from the mainstream financial industry.
Buffett invests his own money and doesn't sell his stock: he started the
Buffett Partnership with $100K of his own savings. His gains or losses are
proportionally equal to that of his investors. I guess maybe the original
limited partners had it different (Buffett probably got a larger share of
Berkshire for his $100k than the limited partners got), but I doubt any of
them are complaining now.

Investing in Berkshire Hathaway is "Heads we both win, tails we both lose.
Hope you like betting the same way I do." By contrast, investing in a hedge
fund is "Heads I win, tails you lose" and investing in a mutual fund is
"Either way I win, tails you lose."

