2016 Berkshire Hathaway Annual Shareholders Meeting

Last Saturday was a great day for value investors and perpetual learner who try to learn and read as much as they can about Warren Buffett and Charlie Munger. With 85 and 92, respectively, they talked and reply answers during more than 7 hours. Bravo.

I wanna to share here a few interesting links about the event.

Annual Shareholder, great Yahoo! Finance live coverage. Here the show:


16-minute Yahoo! Finance video with Charlie Munger:


Warren playing ping pong

More | Omaha Links

Notes Chapter 3: Margin of Safety

  • The great majority of institutional investors are plagued with a short-term, relative-performance orientation and lack the long-term perspective that retirement and endowment funds deserve.
  • [Taking about institutional investors] Hundreds of billions of other people’s hard-earned dollars are routinely whipped from investment to investment based on little or no in-deph research or analysis.
  • You probably would not choose to dine at a restaurant whose chef always ate elsewhere. You should be no more satisfied with a money manager who does not eat his or her own cooking.
  • Selling is difficult for money managers for three additional reasons:
    • 1) Many investments are illiquid, and disposing of institutional-sixed positions depends on more than simply the desire todo so.
    • 2) Selling creates additional work as sale proceeds must be reinvested in a subsequent purchase. Retaining current holdings is much easier.
    • 3) SEC, the governmental agency with regulatory responsibility for mutual funds, regards portfolio turnover unfavorably. Mutual fund managers thus have yet another reason to avoid selling
  • Institutional investors are caught in a vicious circle. The more money they manage, the more they earn. However, there are diseconomies of scale in the returns earned on increasingly large sums of money under management.
  • Allocating money into rigid categories simplifies investment decision making but only at the potential cost of lower returns.
  • Window dressing is the practice of making a portfolio look good for quarterly reporting purposes.
  • As depressed issues drop further in price, attractive opportunities may be created for value investors.
  • Unfortunately the appropriate relationship between bond yields and stock prices cannot be incorporated into a computer program. There are simply too many variables to allow investors to determine a relationship today that will apply under every future scenario.
  • Value investors believe that stock prices depart from underlying value and that investors can achieve above-market returns by buying undervalued securities.
  • Investing without understanding the behavior of institutional investors is like driving in a foreign land without a map.

Notes Chapter 2: Margin of Safety


  • What is good for Wall Street is not necessarily good for investors, and vice versa.
  • Wall Street firms perform important functions for our economy: they raise capital for expanding businesses and (sometimes) provide liquidty to markets.
  • Up-front fees clearly create a bias toward frequent, and not necessarily profitable, transactions.
  • Investors even remotely tempted to buy new issues must ask themselves how they could possibly fare well when a savvy issuer and greedy underwriter are on the opposite side of every underwriting.
  • Investors must never forget that Wall Street has a strong bullish bias, which coincides with its self-interest. Wall Street firms can complete more security underwritings in good markets than in bad.
  • Some people work on Wall Street solely to earn high incomes, expecting to depart after a few years.
  • A few Wall Street partnerships have done a particularly good job of motivating their employees to think past the current transaction.
  • The bullish bias of Wall Street manifests itself in many ways. Wall Street research is strongly oriented toward buy rather than sell recommendations.
  • Although high stock prices cannot be legislated, regulation can cause overvaluation to persist by making it easier to occur and more difficult to correct.
  • Many of the same factors that contribute to a bullish bias can cause the financial markets, especially the stock market, to become and remain overvalued.
  • [Talking about new type of securities] There is something – lower risk, higher return, greater liquidity, an imbedded put or call option to the holder or issuer, or some other wrinkle – that makes it appear superior (new and improved, if you will) to anything that came before.
  • The value of a company selling a trendy product, such as television shopping, depends on the profitability of the product, the product life cycle, competitive barriers, and the ability of the company to replicate its current success.
  • All market fads come to an end. Security prices eventually become too high, supply catches up with and then exceeds demand, the top is reached, and the down ward slide ensues.

Factors needed to make money in the stock markets

Walter Schloss was, together with Warren Buffett, Benjamin Graham’s students at Columbia University. Sometimes forgotten value investor with an amazing performance (see tables below). Today I discover a Walter Schloss called “Factors needed to make money in the stock markets” that he wrote in 1994, I believe these are his principles for make money. Must read for all who want to invest money.

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Lynch Law

Common Sense Investing

i. Know what you own.
ii. It is futile to predict the economy, interest rates, and the stock market.
iii. You have plenty of time.
iv. The ten most dangerous things people say about stock prices:

  • If it has gone down this much already, it can’t go much lower.
  • If it has gone this high already, how can it possibly go higher?
  • Eventually, they always come back.
  • It’s $3, what can I lose?
  • It’s always darkest before the dawn.
  • When it rebounds to $10 I’ll sell.
  • What, me worry? Conservative stocks don’t fluctuate much.
  • Look at all the money I’ve lost, I didn’t buy it.
  • I missed that one. I’ll catch the next one.
  • The stock has gone up, so I must be right. The stock has gone down, so I must be wrong.

v. Other general rules

  • Avoid long shots
  • Avoid high growth, easy entry industries.
  • Look at the balance sheet.
  • Great stocks are always a surprise.
  • The individual has several advantages versus the professional investor.
  • There is always something to worry about.

Source: Lynch Law