Thursday, February 12, 2009

A Difference in Focus: Buffett and Journalists

In what is becoming a routine criticism, yet another article mentions that Buffett started buying too early.

Warren Buffett likes to say his favorite length of time to hold a stock is "forever." That's a good thing, because some of his more recent investments aren't making him money in the short run.

Buffett, 78, who is ranked the richest man in the United States by Forbes magazine, placed bets over the past two years on companies ranging from Kraft Foods and Johnson & Johnson to the oil producer ConocoPhillips.

After last year's 38 percent drop in the Standard & Poor's 500 Index, they are among the stocks trading at less than what he paid when he last added their shares to the holdings of his Berkshire Hathaway.

The man heralded as the "Oracle of Omaha" tells acolytes he evaluates companies based on their stability, their competitive advantage and what he thinks they will be worth years into the future, instead of trying to find the moment when their stocks are at their lowest. The declines in his recent equity purchases suggest he could have waited before taking the plunge.

We agree Buffett bought too early--as value investors almost always do--but we think it is both interesting and important to point out a difference in focus.

The relatively poor journalists in all these articles focus on the outcome of a decision (measured over the short-term) while the world's richest man is focused on his investing method (which looks at the value of a company over the long-term).

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