Saturday, March 8, 2008

Carry On, Mr Buffett !

I'm back !

Yes, after weeks of being busy doing nothing in general, i've succummed to the lure of my blog. Interestingly my life seems to resemble the world of Sherlock Holmes - weeks of languor, followed by brief spells of frenetic activity !

Fruity opening over, lets cut to the chase, shall we ? There was this most amusing article I read a few days back at the Mess Hall. It appeared in the ET (Page 11, 6th March, '08)with the title- "Sage of Omaha losing followers among Indian Fund Managers".

The article talks of how some of the pithy Buffett comments which are enjoyed by millions don't cut much ice with our desi managers. Particulary his quote on competitive advantage -" A truly great business must have an enduring moat that protects excellent returns on invested capital" was lampooned as " stating the obvious".

The managers qouted spoke of how one needs to be "completely flexible, like an amoeba" and that "investment philosophy can't be written on a piece of paper". It also talks of HUL as an ideal example that has failed to measure up to return expectations despite meeting Buffett's "obvious" comments.

Well, arguing Buffett's case is simple.During the 32 years of Berkshire Hathaway, an investment in 1965 has grown at a compound growth of 21.1% versus 10.8 % at the S&P500. Berkshire is now a behemoth straddling different industries, combining scale and gargantuan size. On the PetroChina sale, Berkshire paid the IRS a tax of $1.2Bn-enough to fund all expenses of the US government for 4 hours.. And finally, he has not been fully quoted on this one. He talks of an enduring moat. But he follows it up with the hope that the moat expands, has some sharks swimming in it (read entry barriers)and a Duke (read CEO) who managers the fort well.

All this talk has not been at the cost of ethical flirting. Mr. Buffett is well known for his principles and the freedom that he gives to his managers to run the business. Simply put, a man who know what he is best at and gives it his all.

At $62Bn in networth, Mr. Buffett stands as the richest individual on earth, and holds a track record that has withstood the incurable emotional problems of the global markets. Most fund managers in India have simply benefited from the high tides of the last 5 years. Now that the tide is ebbing, we shall soon know who has been swimming naked.

Carry on, Mr. Buffett !

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