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Be contrarian, advises expert on Warren Buffet
Robert Miles, an expert in investment and on Warren Buffet, says the investment guru’s secret is to buy when the market is depressed and sell when it is “happy.”
“(Buffet) would say investing is simple,” he told Thanh Nien Daily on the sidelines of a seminar about the billionaire investor, which was held in Ho Chi Minh City last Wednesday.
Miles, who came to Vietnam to talk about Buffet’s investing “genius,” has written several best-selling books about him.
He says Buffet is a successful investor because he does what others don’t.
“(Most investors) buy when everyone else is buying … and they sell when everyone else is selling.”
Buffet, on the other hand, is “fearful when everyone else is greedy and greedy when everyone else is fearful.”
And when it comes to picking a business to invest, Buffet also looks at its management.
If the management is outstanding but the business is poor or the price is unattractive, Buffet isn’t interested.
“If the business is really good but with a bad management, he’s not interested [either] because he doesn’t want to run the business. He can’t. He’s only got less than 20 people at headquarters.”
He only buys businesses and managers with abilities and long experience.
Buffet is not a risk taker, Miles says. “He’s always trying to reduce risk. To reduce risk by a margin of safety, by buying things for less than he thinks they are worth.”
Miles says Buffet invests chiefly in the US market because he understands it thoroughly.
As for developing markets like Vietnam, the “nuances” of the market may be too complicated for outsiders to master.
Or they are too small. “He has US$200 million a week that he needs to invest and the Vietnamese stock market is just not big enough.”
For Buffet, basic industries like insurance, railroad, food, beverages and banks are more attractive because they have earnings and their earnings are predictable.
“To value an investment, he’ll go out 10 years. If he goes out in 10 years, like with Microsoft, he doesn’t know where Microsoft will be in 10 years, so he can’t value it, so he doesn’t invest.”
But with a basic industry, like a Vietnamese bank, investors can predict where it will be after 10 years.
“(A basic industry) has been around since the beginning and it’s going to stay around.”
Miles predicts Buffet will soon make a very large investment – probably $10 billion or more – because he’s sitting on $38 billion in cash, and with the economy declining he will find more attractive investments.
“It will probably be a wholly-owned business not a publicly-listed company. But the valuations are the same — the way you buy a whole company, you’d figure it out the same way you’d buy a stock.”
Miles cautions Vietnamese investors against buying stocks in Buffet’s company, Berkshire Hathaway, because of the currency risk of investing in the US
If the Vietnamese dong appreciates 20 percent and Berkshire Hathaway gains 20 percent, there’s no net gain, he explains.
Miles says the most important thing for Vietnamese investors is to study Berkshire Hathaway and Warren Buffet and apply the lessons in Vietnam, rather than to buy Berkshire Hathaway.
Thanhnien
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