2/1/2011 4:46 PM ET|
The secret of Buffett's success
The Oracle's respect for business people he trusts -- and who trust him -- allows Buffett to buy into top companies on favorable terms.
After his recent announcement that he'll step down as a director of Washington Post (WPO, news) when his term expires in May, Warren Buffett made it clear that his investment vehicle, Berkshire Hathaway (BRK.B, news), isn't abandoning its longtime investment in the company.
"We're going to keep every share of stock we have," he said. "I would never sell a share of the Post."
What's interesting about his comment is that the newspaper industry isn't protected by an enduring moat like, say, Coca-Cola (KO, news), is. It's a dying business with scant hope of turning itself around. How do I know? Buffett said so.
"Twenty to 40 years ago, (newspapers) were essential to customers and advertisers," Buffett said two years ago. "They had pricing power, but (it) essentiality has eroded. Erosion accelerated dramatically, and it won't end based on anything on the horizon. We do not see anything to reverse it. They are essential to advertisers only as long as they're essential to readers."
Buffett then gave his stance on selling his newspaper investments: "As long as we're not losing money forever and there are no union problems, we won't sell," he said. "We'll play it out as long as we can."
To be fair to the Post, after a decade of diversification, the company is more than a newspaper publisher. For-profit education and cable TV now account for nearly all of its operating profit. This, though, hasn't exactly turned the company into a durable franchise -- if there are two industries whose futures look as scary as newspapers, it's for-profit education and cable TV.
Loyal to a fault?
So why does Buffett hold a till-death-do-us-part attitude?
I think his comment about newspapers underlines a key reason Berkshire has been so successful. Buffett will, to an extent, stick with lousy investments because he has made a commitment to the company, its managers and its employees.
Consider what Buffett once said about why a business would be better off selling itself to Berkshire than being bought out by private-equity investors. "You can sell it to Berkshire, and we'll put it in the Metropolitan Museum. It'll have a wing all by itself . . . it'll be there forever. Or you can sell it to some porn-shop operator and he'll take the painting and he'll make the boobs a little bigger, and he'll stick it up in the window and some guy will come along in a raincoat and he'll buy it."
Or this line, spoken to a reporter who asked Buffett why businesses looking to sell should come to him first: "If they care about the business and how the people are treated afterwards, Berkshire will be the best option."
VIDEO ON MSN MONEY
The secret of Buffett's 'success' is that he has government information that most people do not have about intelligence activities that support international corporations. Why do you think he is so attached to Coca Cola? Coca Cola and the CIA are a mutual admiration society. Agents frequently use the cover of Coca Cola employee credentials to fly anywhere in the world. In return, the US Government always bankrolls Coca Cola when times are tough. Buffett pretends too engage in risk but nothing could be farther from the truth.
Did you know that Warren Buffett was given a US government loan of over 40 million dollars at less than 1% (virtually PAYING him to take the money when you figure inflation in) interest nearly 3 DECADES ago?
If you are in denial about Buffett, do some google research. Stop living in la-la land. The guy is an insider so he games the system, period.
He is the ULTIMATE welfare queen. What he did with Goldman Sachs a few years ago should have landed him in prison. He loaned money to bankrupt Goldman at 10% KNOWING that you and I would ensure the loan. The man has no integrity whatsoever.
Shame on MSN for cheerleading Buffett.
Morgan, you seem to have no knowledge at all that Buffett's first fortune was man in arbitrage - taking a company apart and selling the pieces for more than the whole was worth together.
And his usual modus operandi is to buy a company and then FIRE all the top dogs and put his own management team in, like he did with Geico and other businesses.
A cutesy story, but it doesn't mesh at all with his record.
Every scents i read about buffet I;ve always have much respect for him. With out TRUST you cant move forward' when the trust is not there its a whole new game.
When you buy a company that';s in trouble you see opportunity that current mangement did not see Rule number one fire the people that put the company in that position then rebuild .
Price is what you pay . Value is what you get
You only know what you know
I Trust every one, till they want something from me
In the above video Mr. Buffett said America would still be the leader in 25 yrs. Your capgtioning said otherwise. You are stating in your captioning that in time we won't be.
You need to correct that. It's not right. DON'T put a slant on what he has said. That's how things get blown out of proportion.
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