In The Name of Warren Buffet and Dien Rice and the Holy Spirit of Investing for Handicapped...

In The Name of Warren Buffet and Dien Rice and the Holy Spirit of Investing in Products for Handicapped, Sick and Needy.

No, I am not ashamed of the title of this message.

Actually I think that the more adaptations of he sacred formulas we have, the better we understand them and actually make them WORK.

My questions to Dien Rice.

How many stocks in your lucrative portfolio are actually the stocks of the companies that help handicapped, sick, needy...?

In your previous posts you mentioned only one such company.

I am positive that there are far too many.

If yes, are you willing to use a stock-picking service BASED on the principle that the above mentioned companies are MOST likely to grow and succeed?

Simon

Hi Simon,

> Actually I think that the more adaptations
> of he sacred formulas we have, the better we
> understand them and actually make them WORK.

> My questions to Dien Rice.

> How many stocks in your lucrative portfolio
> are actually the stocks of the companies
> that help handicapped, sick, needy...?

> In your previous posts you mentioned only
> one such company.

> I am positive that there are far too many.

My approach is to follow something Buffett said, which is, "Put all your eggs in one basket, but WATCH THAT BASKET!"

So I don't follow the usual advice of diversification.... I agree (with Buffett) that it is good to diversify if you don't know what you're doing.... But if you DO know what you're doing, then it's better to focus your money in the most lucrative places you can find....

I do happen to have a lot of my money in a few companies that deal with health care and medical technology (such as Resmed).... One reason is that I do feel good knowing that these companies are advancing our health care technology, and really helping to save people's lives. The other reason is also that demographics suggests that health care will be good for the long term....

However, I'm happy to own non-health-care stocks too.... I've looked at technology companies before, but either they weren't making any money, or where they were, I thought their share price was too inflated. Now, things have changed, and some solid tech companies may have been oversold and may be good value....

Right now, I'm moving my pension money from a normal pension fund (or a "superannuation fund" in Australia) to a family pension fund which myself and my brother Thomas will control. So I'm looking at what to invest in right now, but haven't really done very much analysis of this yet.

Some of the companies we'll be looking at (which seem to pass "Step 1" mentioned below in the forum, solid growth in EPS for at least 5 years) are Tiffany's (TIF), Pre-Paid Legal (PPD) (though they have a worrying court case), Oracle (ORCL) (though their EPS growth is not as predictable as I'd like), Microsoft (MSFT) (it looks like they'll probably win their appeal), Lehman Brothers (LEH), and others.... These are generally quite big companies, I'm sure there are some smaller companies I'll find too to consider investing in (smaller growing companies often have much faster yearly growth in EPS). As we've only just started the analysis, there's still work to do before we decide precisely what we'll invest in.... We may still find things "wrong" with the stocks mentioned above....

> If yes, are you willing to use a
> stock-picking service BASED on the principle
> that the above mentioned companies are MOST
> likely to grow and succeed?

I like to use anything which has a proven track record in working! Though sometimes it can take a while to figure out what that is.... :)

What are you suggesting? I know there's a great suggestion lurking there, Simon.... :)

- Dien

Tuesday, 13 March, 2001, 17:12 GMT
Warren Buffett: 'I told you so'

Whichever way the herd runs, following Buffett can pay off
Investor Warren Buffett took a pasting for ignoring the 1999 surge in dot.com stocks. Now he is enjoying the last laugh, as BBC News Online North America business reporter David Schepp explains.
If investment guru and billionaire Warren Buffett had just one message for investors following the bursting of the internet bubble, it could be: "I told you so."

Mr Buffett, whose moves in the stock market are closely followed by investors, noted in a letter to shareholders of his company, Berkshire Hathaway, that technology investors have overstayed the party.

"Value is destroyed, not created, by any business that loses money over its lifetime"
---Warren Buffett

And, following in the footsteps of US central bank chairman Alan Greenspan, Mr Buffett said that the "irrational exuberance" which invaded stock markets in 1999 and early 2000 has left investors expecting unrealistic returns.

Mr Buffett, who was widely chastised by analysts and in the press last year for failing to cash in on the boom in technology stocks, cited evidence from a Paine Webber-Gallup survey of investors conducted in December 1999.

Dulled into complacency
Participants were asked their opinion about the annual returns investors could expect to realise over the decade ahead.

They answered, on average, rises of 19%, to which Mr Buffett retorted that there were not enough businesses in the country to ensure a return of that magnitude.

"The fact is that a bubble market has allowed the creation of bubble companies, entities designed more with an eye to making money off investors rather than for them"
---Warren Buffett

Mr Buffett warned that the outsized returns experienced by technology investors during 1998 and 1999 had dulled them into complacency.

"After a heady experience of that kind," he said, "normally sensible people drift into behaviour akin to that of Cinderella at the ball.

"They know that overstaying the festivities... will eventually bring on pumpkins and mice."

'Corporate chain letters'
Mr Buffett noted that investors had been hypnotised by the staggering ascent of tech stocks and ignored everything else, including whether the businesses they were investing in were making money.

Without naming them directly, Mr Buffett aimed some of his harshest comments toward dot.coms, those internet-based businesses which issued shares in widely anticipated floats only to shut up shop a few months later.

a fine though unglamorous business, an outstanding manager and a price... that made sense

Buffett on why he invested in Cort Business Services

"Value is destroyed, not created, by any business that loses money over its lifetime," Mr Buffett wrote.

He was referring to the business model all too many dot.coms employed - to enrich investors through rising share prices rather than profits.

"The fact is that a bubble market has allowed the creation of bubble companies, entities designed more with an eye to making money off investors rather than for them."

Unglamorous purchases
Business models for these companies amounted to little more than "the old-fashioned chain letter", he added.

It is advice that could be expected from someone who looks for companies that are undervalued and promise long term profits growth.

Investors need only look at Berkshire's acquisitions in 2000 to get a clear idea of what Mr Buffett & Co view as value stocks.

For example, Berkshire's purchase of MidAmerican Energy, in a year that rewarded energy stocks as gas and oil prices surged in the US, shows why investors envy Mr Buffett's investing prowess.

Berkshire also bought Cort Business Services, which rents furniture to businesses.

Mr Buffett said Cort had all the right ingredients for a purchase: "a fine though unglamorous business, an outstanding manager and a price... that made sense."

Other acquisitions in 2000 included US Liability, an insurance company, boot and bricks maker Justin Industries, carpeting manufacturer Shaw Industries, Benjamin Moore Paint and Johns Manville, an insulation and roofing-products maker.

There was not a technology stock in the bunch.