FYI | Sep 04 2013
By Peter Switzer, Switzer Super Report
This is a momentous week. At the end of it we will not only know who will lead the Australian Government for the next three years, but this week should also bring some important revelations for short-term investors. At times like this, you should remember 10 important lessons from investment guru — Warren Buffett!
Right now newspapers are running headlines such as “Low confidence tipped to persist” and “Don’t bet on a surge in retail” and the sources of these negative headlines are a handful of CEO’s and some analyst at Goldman Sachs.
In the same newspaper, the next headline went “Uncertainty bedevils as economy set to under-deliver on growth” and this was written by someone who a few months ago was telling us that China was going to hell in a hand basket. All of these articles are written by well-meaning journos, but they are hot wired for negativity.
They loved the GFC, the threat of a Great Depression, they chased people into term deposits when they should have been buying CBA under $30, and they totally missed the stocks bounce back in March 2009 and kept scaring the pants off too many investors in 2010, 2011 and 2012.
Switzer equals Buffett
Meanwhile, the Switzer story has always been Buffett-driven, and it is timely for me to share with you something from the Christian Science Monitor in the USA, which grabbed headlines in the USA last week http://www.csmonitor.com/Business/2013/0830/Warren-Buffett-10-pieces-of-investment-advice-from-America-s-greatest-investor/It-s-far-better-to-buy-a-wonderful-company-at-a-fair-price-than-a-fair-company-at-a-wonderful-price.
(In case you are wondering as a consequence of this, I am not a Christian Scientist.)
1.'It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.'
2.'Rule No. 1: never lose money; rule No. 2: don't forget rule No. 1'
3.'Our approach is very much profiting from lack of change rather than from change. With Wrigley chewing gum, it's the lack of change that appeals to me. I don't think it is going to be hurt by the Internet. That's the kind of business I like.'
4.'I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.'
5.'The stock market is a no-called-strike game. You don't have to swing at everything – you can wait for your pitch. The problem when you're a money manager is that your fans keep yelling, "Swing, you bum!" '
6.'Price is what you pay; value is what you get. Whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down.'
7.'Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results.'
8.'If you understood a business perfectly and the future of the business, you would need very little in the way of a margin of safety.'
9.'We've long felt that the only value of stock forecasters is to make fortune tellers look good. Even now, Charlie [Munger] and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.'
10.'We don't get paid for activity, just for being right. As to how long we'll wait, we'll wait indefinitely.'
Sage advice
These 10 commandments from the tablet-bearer of the investment world should be heeded. We are now beneficiaries of a good period for investment, if you take a longer-term point of view.
This election result, if it is a decisive victory to the Coalition, will combine with lower interest rates, a lower dollar, an improving China, a stronger USA, a faster growing Japan and a slightly better Europe, to make 2014 a lot better than many experts are predicting now.
I don't think I will be wrong but even if I was, I would still tell my clients to re-read these Ten Commandments, and buy great companies at a sensational prices.
Peter Switzer is the founder and publisher of the Switzer Super Report, a newsletter and website that offers advice, information and education to help you grow your DIY super.
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