Posted by Ben at 10:13
We are proud to present the first ModernGraham Round Table Discussion, to be held on Wednesday, October 18 at 2:00 Central Time. This is an excellent opportunity for readers to gain an inside peek of the minds of some great financial minds!
How this works:
Readers may submit questions via comments left on this post or the contributor’s blogs, or by email to ben@moderngraham.com. Jon and I will compile the questions and moderate the discussion. Please submit as many questions as you can think of. This discussion can only be as interesting as the questions are.
The actual discussion will be held in this thread of our forum. The thread will be open to the public to read, but only the participants will be allowed to post.
We are excited to have the following people contribute to the discussion:
Rick – Value Discipline
Rick has been a portfolio manager of institutional portfolios for over 25 years. He is currently working with individuals rather than institutions and finds this much more satisfying and rewarding. His greatest joy outside of his family is training young people to become better research analysts.
Geoff Gannon – Gannon On Investing
Geoff leads Gannon On Investing, a value investing blog and value investing podcast influenced by Benjamin Graham, Joel Greenblatt, and Warren Buffett's value investing model. Built upon the value investor insights of intrinsic value, margin of safety, competitive advantage, and protection of principal.
Doug McIntyre – 24/7 Wall St.
Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about.
My question was inspired by this research paper http://ssrn.com/abstract=277161
While not the main topic of the paper, the piece notes that the Sequoia Fund (run by the late William Ruane) returned 16.07% over a 29 year period September 1971 through December 2000. See page 8 of the above cited paper.
Warren Buffett, through BRK, obtained a 28.32% return over the same period. The Sequoia Fund had 35.64% of its assets in BRK.
Why at some point did not the managers of the Sequoia Fund realize that Warren Buffett was a better investor than they were and simply invest most of if not all of the funds in BRK?
While we may not know the answer here is my question to the panel:
My question is based on three assumption: 1) over any reasonable period of time Warren Buffett is a better investor (allocator of capital) than you (or anyone else); 2) BRK’s current share price provides a sufficient MOS; and 3) that value investors accept the two rules as articulated by Graham and Buffett: Rule # 1 do not lose money, Rule # 2 see rule number 1.
Question: what reason does anyone have to support an investment in anything other than BRK, provided its current price represents a sufficient MOS?
if you are a value investor and 1. Warren Buffett is the best and better than you; 2. BRK is selling such that it presents with a MOS; and 3. not losing money is the main rule, is any investment (where the 3 factors just stated are present) not in BRK a statement that:
1) one believes they are a better investor than Buffett sufficient to expect that they will do better than him despite the empirical evidence of the past 50 years; and 2) a bet against him?
# Posted by: Steven at October 15, 2006 01:24 PM
There is much discussion of competitive advantage, often described as a company's "moat."
I think that the use of the term "moat" as it applies to business may be a bit to liberal. I beleive that true moats are hard to develop and harder to defend and that they may be only a handful of companies worthy of that designation. But that is just my opinion.
My question for the panel is this:
Assuming that you had to reserve a moat designation for no more than 5 publicly traded companies, which would they be and why?
# Posted by: Steven at October 16, 2006 03:15 PM
# Trackback ping from Value Investing News on October 15, 2006 04:28 PM