Comment On Buffett’s Early Partnership Letters And Latest Activities

I here below talk about what I’ve done lately. I address it like a mail because it’s based on what I just sent to a fellow investor friend from Germany:

Hi T,

Thanks, I’m doing quite fine. I’m building a house in the woods just out of town. I’m quite entertained and busy doing that. I lately do not feel like dedicating all day to investing. Therefore I seized the chance to invest in building a country house for me and my family. I dedicate some hours to that, at least to supervise the construction. It has been a very valuable experience and I’m enjoying it a lot. It is also a great physical exercise. We have had to shape the natural surroundings in order to adapt the house to the wild topography. I am more and more sure that the final result will be very nice. If you want to come, or know anyone who does, and help build it you’re invited to stay in my house. It’s hard work but it will let you be in one of the most beautiful natural places on earth and we might have fun talking about investing.

Besides that I’ve been reading several books, lots about human action and economy. The most interesting ones about Ludwig Von Mises. I also read some other good books, from David Einhorn and Roger Lowenstein. I even found an interesting one about Buffett’s sister (Giving it all away).

I here send you Buffett’s partnership shareholder letters. It’s another very interesting compilation book I have read lately. You could say that it’s about portfolio tactics. I would indeed classify those letters as giving a big insight into learning tactical portfolio management. You learn a lot about that subject by reading them, just by seeing how Buffett acted back then. But its also teaches much more than that. I’ve learned a lot more with them than with the “modern” ones. You see very clearly how he managed his portfolios in the early days and I find it much instructive for little guys like us. He had quite a fast turnover and talks very personally about his investing philosophy and portfolio management techniques. In those days he seemed to buy and sell a lot. He concentrated more than anything in cheapness and was deeply value oriented. His strategy was to find and buy undervalued companies and sell them when the undervaluation corrected. He also sold fast if he needed money for a better idea. It is interesting to contrast this early strategy with how his portfolio management evolved. In his more mature phase he would concentrate more on great companies, as opposed to undervalued companies. Therefore he would not be too eager to sell just because the undervaluation corrected. He evolved to mainly focus on outstanding businesses. As he grew older it seems that he got more comfortable with the idea that great companies at a fair prices are great investments.

The value to us is that we can learn a lot from what he did back then, it’s more akin to our reality and portfolio size. I also realized that he addressed his partners at a higher intellectual level back then than how he addresses his shareholders now which is one more reason to learn from those letters. Those early letter have been one of the most, or the most, practical investment learning sources that I’ve ever read about. It gives a lot of insight into practical portfolio management tactics.

Thanks for you analysis about Tesco taking into account that Asian competitor DF. It’s a very interesting observation to see how undervalued Tesco ex/Asia would be if you value it’s Asian operations based on its Asian competitors. Then again the apparent cheapness might be inflated if you consider that there are some serious bubbles in some parts of Asia, specifically in retailers. There are indeed probably some serious market inefficiencies world wide.

I have hardly written in the blog because I have more than anything been busy reading. I have not felt the urge to write. This year I have just bought a Spanish train builder (CAF), both for me as well as some family members. I also sold out a small position (XHB). I could write a lot about why I liked that Spanish company but I felt too lazy to do it and invested my time instead in studying it more. My time is split between reading books / building a house / and following my companies, also reading a bit about new ones.

The only company that interests me a bit more now is NOV aka “No Other Vendor”, all the rest I’ve seen does not seem attractive enough. So meanwhile I keep observing, studying and having fun.

Best wishes to you and S.
jrv

About jrv

I was born in Spain and lived in Belgium, Chile, France, USA, Argentina among other places. Currently I am trying to settle down in a wild place. I am "retired", even though now I dedicate more hours "working" for my investments than I ever worked in the real labor market where I used to work in IT and Banking. I am a family man, I have a lovely wife, several sons and one step daughter. I have humble tastes, I like to stay home and read about companies and investments. I started investing at 25 before the internet bubble exploded. I did not know much about investing and liked technical analysis so my results were pretty bad. Fortunately I did not have much to lose. Some years later in 2006 bored of doing only real state investments and with quite a lot of money saved I opened an account in a cheap and excellent online broker and started again. This time I did not want to commit the same mistake, so I decided to follow a model. I heard that Warren Buffett was the best at making money via stocks so I started by reading a lot about him, all of his shareholders letters and several of the books that he recommended. I learned a lot, started applying his investing principles and reading a lot of 10K's. Digested news from lots of different sources. Basically I started buying very good and cheap companies and holding them for ever if possible and if nothing changed fundamentally. When the housing crisis started I was more than 75% cash. At that time I identified good companies at incredibly cheap prices so I invested most of my savings in stocks. In less than I year I doubled. By the second semester of 2009 I turned my software company into an investment vehicle and dedicated myself full time to it. My wife and I decided to change our lifestyle and moved from Belgium to the beach in a wild country. The goal was to keep fixed costs low in order to be able to live with a minimum 6-8% yearly return but specially to move away from the inhuman life of civilization and to have finally some peace and sunny weather to concentrate better on investing. Now I can think and study about companies 60 hours a week and I am doing great. I can finally do what I want full time and can proudly say that I have never been so happy, specially also with my just born 4th son, my other great kids and my sweet wife who supports me fully while I study most of the day and patiently wait for the opportunity to make a swing ! You can learn a bit more about my portfolio by viewing it at www.kuchita.com/view/sumo.php or you may learn more about me and my family by following the link "Author's site" from the menu above.
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4 Responses to Comment On Buffett’s Early Partnership Letters And Latest Activities

  1. anon.coder says:

    Good to hear from you after some time. Do post the pics of the house with the kids once its done !!

  2. jrv says:

    That’s a good idea anon.coder, I think I’ll do that.

  3. Alisha says:

    Hello JRV,

    I am a 22 year old belgian student looking for plans to teach English in Brazil during 3months in the first 2014 semester. I reckon there would be possibilities with everything going on around the world cup by then.
    I read your post about teaching english there and I’d like to know weather you know where I could teach for the short amount of time I will be there.
    I have a 140hours TEFL diploma and can go wherever in Brazil.
    Thank you in advance if you have any advice !

    Alisha

  4. jrv says:

    Hi Alisha, Sorry for the very late reply !

    You can teach in many places it all depends on what you want.

    If you want money you will probably prefer Sao Paolo.
    If you want a calm unstressed life you can chose any small city.
    Even cities at the coast.

    My wife teaches in a very small place and he demand is quite reasonable.

    Brazilians want to learn the language so you should not have problems to find a job anywhere.
    And even if you cannot find one you can advertise private lessons and form groups of interested students to teach them.

    Best wishes !
    jrv

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