The opportunity cost applies to yourself as well. If you're young and don't have much money to invest--your best opportunity might be to get an education and a well-paying job to start.
4:11 “That’s what the game of investment is all about - investment is putting out money to get more money back later on from the asset; not by selling it to someone else, but by what the asset itself will produce. If you’re an INVESTOR, you’re looking at what the asset is going to do (in our case, businesses). If you’re a SPECULATOR [day trader] you’re primarily focusing on what the price of the object is going to do, independent of the business. That’s not our game.”
@@madmantrader Stock price and business fundamentals are two separate deals. Putting a price on the price is what speculators do. Like the idiots who speculate in NFT's ("NFT bro's"), because they're good at math but have no understanding of art or utilitarian value. That crap can fluctuate based on hype, or simply because Elon sends out a tweet...
@@madmantrader Investing in intrinsic value is investing in what the actual business is worth - based on fundamentals like market cap, # of shares, profitability, market competition, etc. Speculation is trading stocks based on price fluctuations created by Elon's tweets or a hot (or not) media story. It's essentially gambling...and why Wall Street is referred to as a "casino."
@@christopherarmstrong2710 yes i get that and I know putting the value on the business is different but I have never seen him give one example about intrinsic value. He doesnt use Dcf analysis cus both and him and munger have said they have never used formulas or calculators to do it. So it must be a round approximation then.
He thinks about the question and tries to answer it as accurate as he can and knows. And any answer to somebody is to some degree made up so dont critisis him for an answer that is reasonable sound. Explain why and what your answer would be to the question "how to get to exellent investment results" and his answer is by any means really deep and good.
concentrated portfolios only worked in warren and charlies generation. Stock market and prices have all changed since then, and it isn't a feasible way to invest anymore.
Luke I disagree- many have a small concentrated portfolio nowadays and do very well. Guy Spier has around 10 stocks and Michael Burry has even less. It depends on whether people are trying to buy a couple great businesses at great prices or are doing distressed bets. In a time like we are living in now with massive speculation, it becomes more difficult to find the businesses cheap but opportunities come.
@@mfranco02 Agreed. Concentration is a rare skill that is very useful to the investor that has the ability and competence to do so. If executed well the returns are far superior than the broader market.
That has to do with growstage and the money numbers that have to be allocated. When you have 1 Million you can invest 1, in one business that has a marketvaluation of 1M. You could invest a local lumbmermill as example. But when you have 500M what company do you know with that valuation? And another hurdle is it legal for you to own more then 9% of a company? Because ownership size is somewhat regulated. So noone just can go and buyout the other market participients and generate a monopoly i.ex. So when you start to allocate 500M you can only search companys where you can buy the whole company or the regulated allowed or wishey ownwership. Then the utmost importend thing is there are not much gems around. There are around 60'000 Stocks and about 2-5% will be around in 20-50 years because of marketdisruption like new foodlaws or new invention that change completly the behavior of consumers. Think about the minidisk or the upcoming of the USB SSD Memorysticks. Cds got obsolete over night! So you will naturaly not find many robust companys with a moat around them that can preveil 20-50-100 years. Capitalism is brutal. Any company grows until its costumerbase shrinks. When McDonalds started out in the 1970 it had a bigger growphase ahead as it has now because then the citys dint have many Mcs. Now allmost every bigger city has one. Not to much citys will feed the consumtion capacity that a Mc provides. At some availability people like to choose for some other food that a Bigmac. Its how markets work. Until a consumption capacity is reached a company can grow from 0-40% in sales, yes there can be more year over year but that is very rare. As bigger as a company grows as smaller the grow goes because people dont want to much mega companys. Think about the Ford trials. Or Standard Oil. They had been cut into pieces so the market could not been dominated by one entity. So in a short sentence "companys grow in the first few years very fast and later not so much because the marketsize is almost reached". Study Monster the energydrink Stock. At somepoint grow slow because there is not more interest to fullfill and then grow slows down.
Because they manage billions which limits the stocks they can buy I.e they can’t buy small cap - because of liquidity issue - also if they invest a small position in the company it would account for a big % of the company outstanding shares. Also having a small positions is meaningless in making meaningful returns
700B in assets means a company would have to be worth 70B for them to grow 10 percent. Smaller companies don't move the needle like they used to. A company worth a few billion isn't worth adding
I guess it's less likely that the really big companies that could absorb a large portion of their cash reserves are ever going to be at a discount to their intrinsic value because so many analysts are interested in them
Oli Gilpin right which is why it goes out the window with a company like Tesla or a small drug manufacturer where it’s nearly impossible to accurately forecast.
@@raheelali4379 But except tech companies is very difficult to find companies that increase in a sustainable way FCF over the years, this is why I choose CFO for companies such as T, KO, ABT, etc. Am I wrong with this approach?
@@sergiveramartinez2685 Some companies are mature like KO that don't need to invest for the future, and they could return the cash generated to the shareholders. For such companies FCF is appropriate. Then there are tech companies like Amazon who are investing everything in new technologies and customer acquisitions. For such companies, you have to think what would be the *normalized* FCF when they are mature and start returning cash flow to shareholders.
A coupon is the rate of interest one receives when investing in a bond..aka the rate of return received annually or biannually according to the bond. You will know what interest rate you will receive before you purchase the bond, it literally tells you.
![Tee Grizzley - Blow for Blow (feat. J. Cole) [Official Video]](http://i.ytimg.com/vi/wNLN5xsx5dc/mqdefault.jpg)
The opportunity cost applies to yourself as well. If you're young and don't have much money to invest--your best opportunity might be to get an education and a well-paying job to start.
Dmitriy Burenok you are very smart
4:11 “That’s what the game of investment is all about - investment is putting out money to get more money back later on from the asset; not by selling it to someone else, but by what the asset itself will produce. If you’re an INVESTOR, you’re looking at what the asset is going to do (in our case, businesses). If you’re a SPECULATOR [day trader] you’re primarily focusing on what the price of the object is going to do, independent of the business. That’s not our game.”
Such a simple statement, logical.
I dont get wht your point is???
@@madmantrader Stock price and business fundamentals are two separate deals. Putting a price on the price is what speculators do. Like the idiots who speculate in NFT's ("NFT bro's"), because they're good at math but have no understanding of art or utilitarian value.
That crap can fluctuate based on hype, or simply because Elon sends out a tweet...
@@madmantrader Investing in intrinsic value is investing in what the actual business is worth - based on fundamentals like market cap, # of shares, profitability, market competition, etc. Speculation is trading stocks based on price fluctuations created by Elon's tweets or a hot (or not) media story. It's essentially gambling...and why Wall Street is referred to as a "casino."
@@christopherarmstrong2710 yes i get that and I know putting the value on the business is different but I have never seen him give one example about intrinsic value. He doesnt use Dcf analysis cus both and him and munger have said they have never used formulas or calculators to do it. So it must be a round approximation then.
Amazing!
11:30 - if the intrinsic value doesn’t make sense then regardless of if others are saying the price will go up, don’t buy
Oli Gilpin
You don’t have to summarise the whole video.
@@Showmetheevidence- it's for myself, don't read if there's an issue :)
When warren refers to a stream of cash, is he talking about dividends or free cashflow for the company?
Free cash flow given the fact that some companies do not pay dividends.
I think buffett makes things up as he goes along.
He thinks about the question and tries to answer it as accurate as he can and knows. And any answer to somebody is to some degree made up so dont critisis him for an answer that is reasonable sound. Explain why and what your answer would be to the question "how to get to exellent investment results" and his answer is by any means really deep and good.
Focus on opportunity cost at all times. This might be a portfolio that is small, but if you understand it very well, that doesn’t matter - 8:00
concentrated portfolios only worked in warren and charlies generation. Stock market and prices have all changed since then, and it isn't a feasible way to invest anymore.
Luke I disagree- many have a small concentrated portfolio nowadays and do very well. Guy Spier has around 10 stocks and Michael Burry has even less. It depends on whether people are trying to buy a couple great businesses at great prices or are doing distressed bets. In a time like we are living in now with massive speculation, it becomes more difficult to find the businesses cheap but opportunities come.
@@mfranco02 Agreed. Concentration is a rare skill that is very useful to the investor that has the ability and competence to do so. If executed well the returns are far superior than the broader market.
Brilliant. Thanks a lot for uploading!
Why is the universe of possible investments smaller, when one is managing larger sums of money?
Because buying a company which has a 500 million market cap or less won't make any changes in their portfolio's size. They have to look at big things
That has to do with growstage and the money numbers that have to be allocated.
When you have 1 Million you can invest 1, in one business that has a marketvaluation of 1M.
You could invest a local lumbmermill as example.
But when you have 500M what company do you know with that valuation? And another hurdle is it legal for you to own more then 9% of a company?
Because ownership size is somewhat regulated.
So noone just can go and buyout the other market participients and generate a monopoly i.ex.
So when you start to allocate 500M you can only search companys where you can buy the whole company or the regulated allowed or wishey ownwership.
Then the utmost importend thing is there are not much gems around.
There are around 60'000 Stocks and about 2-5% will be around in 20-50 years because of marketdisruption like new foodlaws or new invention that change completly the behavior of consumers. Think about the minidisk or the upcoming of the USB SSD Memorysticks. Cds got obsolete over night!
So you will naturaly not find many robust companys with a moat around them that can preveil 20-50-100 years. Capitalism is brutal.
Any company grows until its costumerbase shrinks. When McDonalds started out in the 1970 it had a bigger growphase ahead as it has now because then the citys dint have many Mcs. Now allmost every bigger city has one. Not to much citys will feed the consumtion capacity that a Mc provides. At some availability people like to choose for some other food that a Bigmac.
Its how markets work. Until a consumption capacity is reached a company can grow from 0-40% in sales, yes there can be more year over year but that is very rare.
As bigger as a company grows as smaller the grow goes because people dont want to much mega companys. Think about the Ford trials. Or Standard Oil. They had been cut into pieces so the market could not been dominated by one entity.
So in a short sentence "companys grow in the first few years very fast and later not so much because the marketsize is almost reached".
Study Monster the energydrink Stock. At somepoint grow slow because there is not more interest to fullfill and then grow slows down.
What year is this?
From what year is this?
1997
Could anyone explain to me what Warren means when he says they have less options because of the amount of money they manage?
Because at some point they will have bought up the entire world if they keep on going like that. That is impossible of course:(
Because they manage billions which limits the stocks they can buy I.e they can’t buy small cap - because of liquidity issue - also if they invest a small position in the company it would account for a big % of the company outstanding shares. Also having a small positions is meaningless in making meaningful returns
700B in assets means a company would have to be worth 70B for them to grow 10 percent. Smaller companies don't move the needle like they used to. A company worth a few billion isn't worth adding
@@magnum-kj5ip thanks
I guess it's less likely that the really big companies that could absorb a large portion of their cash reserves are ever going to be at a discount to their intrinsic value because so many analysts are interested in them
Intrinsic values comes from understanding future cash flows
Oli Gilpin right which is why it goes out the window with a company like Tesla or a small drug manufacturer where it’s nearly impossible to accurately forecast.
Thanks a lot 👍
Also comes from a their market cap relative to their tangible book value per share/ book value per share.
Is he talking about FCF or CFO
Fcf: cash that u could take out of the biz.
@@raheelali4379 But except tech companies is very difficult to find companies that increase in a sustainable way FCF over the years, this is why I choose CFO for companies such as T, KO, ABT, etc. Am I wrong with this approach?
@@sergiveramartinez2685 Some companies are mature like KO that don't need to invest for the future, and they could return the cash generated to the shareholders. For such companies FCF is appropriate.
Then there are tech companies like Amazon who are investing everything in new technologies and customer acquisitions. For such companies, you have to think what would be the *normalized* FCF when they are mature and start returning cash flow to shareholders.
@@raheelali4379 Thank you so much! So for stable companies that pay reliable dividends (KO, T, PG, etc) it is better to use FCF isn't it?
@@sergiveramartinez2685 Correct
Me with cannabis stocks
What year is this meeting?
Jay BK 1997
year?
1997
The best video....this literally sums up everything
Coupon, Whats a coupon & where find a coupon, All Fraud!
A coupon is the rate of interest one receives when investing in a bond..aka the rate of return received annually or biannually according to the bond. You will know what interest rate you will receive before you purchase the bond, it literally tells you.