It has been a while since I last sumarised the annual letters that Warren Buffett writes to his shareholders. I was halfway through the 2001 letter, and will attempt to round it up here.
In that year, Warren Buffett had lukewarm feelings about stocks for the rest of the decade. He felt that the market had outperformed the business for a long period of time, and that had to end. Any investor buying in at that time would likely be disappointed.
These are not suitable investments for the general public, because too often they will live up to their name. When losses occur, they are often disasterous.
Warren Buffett’s own purchase of junk bonds had always been on the secondary market at a discount to the issue price.
About Media Reports
Sometimes, newspapers will report (based on information gathered from filings) that Warren Buffett is buying a particular stock.
While these reports are sometimes correct, sometimes they aren’t. Some of these purchases were actually not made by Warren Buffet, but by Lou Simpson, who manages GEICO’s $2 billion portfolio.
Warren and Lou work independently; they do not have any idea what the other is buying. Both of them have similar thinking, but the stocks they buy are usually different. This is because Lou has a smaller portfolio to deal with.