Mr. Buffett's Value Investment paradigms
“I get to work in a job that I love and I think you are out of your mind for taking jobs you do not love. Take a job that if you were independently wealthy you would do, loving what to do is much more important than money making” ~Warren Buffett~
As a prelude into part 3, I want you to spend some few minutes to reflect on the above concluding remarks I used for my last. I must contend that, the responses gotten so far from readers on part 1and 2 were indeed remarkable. Folks, your good commentaries are greatly appreciated. Thank you so much for the effort-boost. At this point I wish to explore further Mr. Buffett's value investment paradigms. It is imperative to follow through the discussion without getting easily swayed by the length of the article.
(a) Investments and valuations are not gambles but an understanding of what one is doing. Warren Buffett notes that, in his investment abilities, he only invests in organizations that he UNDERSTANDS. By this Buffett argued that people should not invest their resources thus money and energy into ventures they have no knowledge of particularly the management and profitability of the organization. “Make no mistake a public opinion poll is no substitute for thought. When you find a situation you understand, where the facts are ascertainable and clear, then act, whether the action is conventional or unconventional and regardless of whether others agree or disagree. When you are dead sure of something and are armed with all the facts, then everyone else's advice is only confusing and time-consuming” –I only invest in ventures "That may seem easy to do when one looks through an always-clean, rear-view mirror”. Most people have become victims to this dilemma by listening to friends, motivational speakers to invest into companies they have no idea. As you cry foul for some of the wrong choices, note his first point: do not waiver over your mistakes, use the experience to build a character and knowledge for subsequent opportunities.
(b) Consider the usefulness and future prospects of the organization (5years, 10 years, and 20 years). "If, when making a stock investment, you're not considering holding it at least ten years, don't waste more than ten minutes considering it."
(c) Look for companies that do not show a dramatic change in their business. It is imperative to consider the durability, longevity and competitive advantage of the organization over others.
(d) Management –are they trustworthy and passionate about the business? You can discern into management activities by analyzing into intotos their handlings of cash flows particularly, a company's investments opportunities, assets and liabilities.
(e) Pricing –buy cheap or at reasonable prices, tell the truth, sell cheap and make more money. “If you wait to see Robins, spring will be over” Buy stocks at the time people want to sell –the best time to be buying stocks is now particularly in this financial crisis “why save sex for your old age?” In his annual shareholder letter Buffett wrote, "We've put a lot of money to work during the chaos of the last two years. When it's raining gold, reach for a bucket, not a thimble." Buffet notes that his acquisition of wealth started in the year of recession in 1954.
(f) Take responsibility for your actions –Winston Churchill said “The price of greatness is responsibility thus: being responsible for who you are, what you can do, what you have received and those that you lead.” Buying investment requires responsibility to confidently say YES when you are very sure of the opportunities available.
As always, I am closing the chapter of this article with a simple quote from Noko Bi (a columnist) “The problem with Corporate Africa is that it seems to have accepted defeat; the key strategy for Africa to break the chain of economic domination is to develop strong Intra-African trade; have a common voice in global trade negotiations and turn the region into a low-cost-high-quality production centre and remember that if you dwell on the success and power of existing players, you can never get started” Corporate Africa needs to get up and challenge the status quo”
Folks, a journey of thousand miles begin with a step: take a step now and divine providence will rearrange the rest. Stay blessed and keep hopes alive. It is well. Lookout for Part 4.
God Bless Ghana; God Bless Africa and the world.
Chris Opoku –Agyeman ([email protected])
University of Akron.
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