Well, at least some light refreshments were provided this time round. They must have heard our complaints in the morning. :)
Back to session 4 of the seminar.
When paying for any share, you would want to pay less than the intrinsic value that you have calculated. Why? In the calculation of the intrinsic value, a lot of it is done by estimation and it is impossible to get a ‘correct’ value. The lesser you pay, the higher your margin of safety.
The stock market is just like an auction process. Prices can go rock bottom or sky high. But whatever the price, remember that no one can force you to participate. You always have the choice of bidding or not bidding.
We are then shown a comparision of Warren Buffett 40 years against Lou Simpson’s 25 year investment performance. Lou Simpson manages GEICO Equities and is one of those possible candidates to succeed Warren Buffet.
He has a return of 20.3% versus Warren’s 21.9%. Quite a close match but if we look at just the last 5 years, he has actually outperformed Warren. An interesting observation about Lou’s portfolio is that his top 10 shareholdings are totally different from that of Warren’s.
The lesson to be learned is that copying a winning portfolio is not a guaranteed formula for investment success. At different times of purchase, many factors would be different and the buying decision derived earlier might not hold anymore. Independent thinking is important.
For those who can’t resist a stock tip, one of Warren’s latest acquisitions is Bugweiser. The current share price is actually slightly lower than his purchase price. What are you waiting for? :)
The seminar ended by revealing the winner of the valuation contest. The correct answer was 80 million which Warren paid for Disney. My answer of 71 million was close but not close enough. A student of 21 yrs old actually won the prize with 79.x million. Lucky fellow. His (totally irrational) method of using 30% over book value actually won him the tickets to Ohama!
Ironically, I had read an article on Disney earlier in the morning inside Forbes magazine. What a coincidence!
Overall, I would say that the attending the seminar would be well worth it for those who are starting out in investment. Having the right mindset would save you from a lot of heartache and losses which will surely be more than that five hundred dollars.
For myself, I was a bit disappointed. I had already been a follower of Warren Buffett and I would have expected a bit more for the money that I paid. Oh well, one good thing that came out of it is my decision to start this site. :)