Talk on Buffett’s investment principles

Source: THE STAR ONLINE

KUALA LUMPUR: Warren Buffett may have reported some huge losses in the investments he made through Berkshire Hathaway Inc over the last couple of months, but the recent quarterly results only show that a longer-term view is necessary to evaluate his investment returns, says Robert P. Miles.

“As in most of the mistakes he made in the past, Buffett would probably say ‘a little more time please’,” Miles, an author, professional speaker and Warren Buffett expert, told StarBiz in an email.

Buffett, whose investment strategies and techniques are still regarded by most as the best and most successful ever, was not spared from the recent global financial crisis.

Weighed down by losses from investments and derivative bets, his investment arm Berkshire Hathaway posted a net loss of US$1.53bil (RM5.43bil) – its worst loss in at least two decades – for the quarter to March 31, compared with a profit of US$940mil in the same period a year ago.

But the company returned to the black with a second-quarter profit of US$3.29bil on improved stock markets and credit derivative gains.

“The global financial crisis presented Buffett some unbelievable opportunities to invest in preferred stocks such as Goldman Sachs, General Electric Company and Swiss Re,” Miles said, adding that railroads and banks were some of Buffett’s favourite plays currently.

For instance, Buffett in May increased his stakes in Wells Fargo & Co and US Bancorp by about 4.3% and 2.2%, respectively, when both counters were trading at their lowest prices in more than a decade.

“Buffett understands banks,” Miles said, “and he obviously believes in the long-term health of the banks, and he thinks their managers are rational, candid and doing the right thing for their shareholders.”

According to Miles, Buffett is an excellent example of corporate governance and should be studied around the world.

“He has greatly influenced many corporations – particularly those in which he holds stakes – such as in the way they expense their stock options, change their accounting procedures and make transparent their executive perks in their annual reports,” Miles said, adding that Buffett had resigned from some boards that had not followed his advice.

Miles will be in Kuala Lumpur to conduct a one-day seminar on Buffett’s principles of investment on Thursday at Istana Hotel.

Organised by the Malaysian Alliance of Corporate Directors, the seminar will feature Miles speaking on Warren Buffett Corporate Governance: Building a World Class Board of Directors and Astute Investing in Turbulent Times: Why Warren Buffett Prefers Declining Markets.