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巴菲特:投资就是集中精力研究将来会发生什么,而不是何时发生

Buffett: Investing is about focusing on studying what will happen in the future, rather than when it will happen.

The Future Music Club ·  Jan 14 15:43

Source: Qilehui

There is no need to restrain one's investment practice with too many Concept frameworks; aim for returns at the Index level in a bull market and avoid losses in a bear market. Strive towards this goal. If outperformance is possible, please contact me, as I believe you should manage my funds.

The first principle of value investing.

There are many interpretations of value investing in the market, which are varied and dazzling.

Personally, I think the definition of value investing is quite simple. What is value investing? As long as your first principle of investment is to avoid losing principal, then what you are doing is value investing.

Whether you are a long-term investor or a short-term investor, concentrated investment or diversified investment, going short or going long, investing in Stocks/Bonds or investing in Forex contracts/CSI Commodity Equity Index, buying good businesses or bad businesses, as long as you adhere to the investment principle of not losing principal during the investment process, it is value investing.

There is no need to restrain one's investment practice with too many Concept frameworks; aim for returns at the Index level in a bull market and avoid losses in a bear market. Strive towards this goal. If outperformance is possible, please contact me, as I believe you should manage my funds.

The macro environment in the USA in 1966.

In early 1966, as the USA economy became increasingly mired in stagflation, while the Federal Reserve's interest rate hikes entered the second half, coupled with the ongoing Vietnam War and the gradual rise of domestic anti-war movements, the stability of the domestic political situation declined. The market began to fall, transitioning from a bull to a bear market, marking the beginning of a 16-year bear market in US stocks.

Key Economic Indicators:

In 1966, the US GDP was 815 billion dollars, growing 9.59% compared to 1965, with GDP accounting for 37.67% of the world's economic total.

In January 1966, the unemployment rate in the USA was 4%, dropping to 3.8% by December 1966.

The inflation rate in the USA in 1966 was 3.02%.

Important Events in the USA that Year:

In January 1966, the highest dividend yield in a decade reached 34.2%.

In June 1966, the USA bombed Hanoi.

On October 9, 1966, the USA reported that the Vietnam War now costs 2 billion dollars a month.

Market Index:

At the end of 1966, the composite index of the New York Stock Exchange in the USA fell from 533 points at the beginning of the year to 462 points at the end of the year, an overall decline of -15.37%.

At the end of 1966, the Dow Jones Industrial Average closed at 785.68 points, down 18.94%. After adding back the cash dividends of component stocks, the annual return of the Dow Jones Industrial Average was -15.6%. The composite index of the NYSE can give us a glimpse of the USA's economic situation that year.

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1966 New York Stock Exchange Composite Index Chart

Buffett's net worth at the age of 36

At the beginning of 1966, the Buffett partnership Fund had a size of 43,645,000 (Buffett 6,849,936 dollars, accounting for 15.69% of the partnership fund).

A rough estimate suggests that Buffett's net worth that year was around 7 million dollars, equivalent to 70 million yuan in 2023.

The China Wealth Report 2023 by CICC states that the wealthy class (about 4.6 million people, accounting for 0.33% of the total population) has a total wealth of 290 trillion yuan, with an average wealth of 63 million yuan.

Is value investing a slow path to wealth? Obviously, 36-year-old Buffett holds a contrary opinion.

In 1966, the partner fund's return rate was 20.4%, outperforming the Dow Jones Industrial Average by 36 percentage points, marking the year with the largest advantage over the Dow in the past ten years, with LP partners achieving a return of 16.80%.

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Performance of the four major types of investments in Buffett's partnership fund in 1966.

In 1966, Buffett's Hold Positions included:

Buffett began buying American Express stocks at the end of 1964, and by the end of 1966, he had purchased American Express stocks valued at 13 million dollars, making it the largest position in the partnership fund. At that time, American Express was gradually recovering from the salad oil scandal, and its stock price rose from 35 dollars to 49 dollars. The return on this investment was a major support factor for Buffett's outstanding performance in 1966.

In 1966, Buffett invested 4 million dollars in Walt Disney Company, acquiring about 5% of the company's shares, and sold them in 1967, making a profit of 55%.

  • Hochschild-Kohn Company:

In 1966, Buffett, Charlie Munger and others established the holding company Diversified Retailing Company, with Buffett holding 80% and Munger 10%. The company would primarily focus on acquiring Retail Trade Assets.

The first transaction involved borrowing 6 million dollars from Banks to acquire the department store Hochschild-Kohn. They felt that they were acquiring second-tier assets at third-rate prices. This investment ultimately broke even.

The price of Berkshire Hathaway Inc. stocks that Buffett purchased previously is now more than double his purchase price. He took control of Berkshire Hathaway Inc. in 1965 and continued to increase his Shareholding in 1966, making it a significant Hold Position within the partnership.

In 1966, Buffett extracted cash from Berkshire's textile business while selling off some fixed assets related to the struggling business, transferring approximately 5 million dollars from the inefficient textile operations to investments in securities, which prepared him to invest 8.6 million dollars the following year to acquire National Indemnity Company—though he had no idea that such an acquisition opportunity would arise the next year.

However, by the end of 1966, of the 5.46 million dollar portfolio that Berkshire held, 4.8 million dollars were in Bonds, with the Market Cap of Stocks being less than 0.66 million dollars, indicating that he might have been planning some significant buy for Berkshire.

Investment philosophy emphasized by Buffett in 1966.

Buffett's definition of conservatism: 'Suffering a far lower loss in value compared to the average level, whether temporary or permanent.’

Interpretation: In a bull market, aim for returns that match the Index; in a bear market, strive to avoid losses. How to choose this Index? Like Buffett, should one choose the Dow Jones Industrial Average or the SSE Conglomerates Index? It varies by individual. Different metrics yield different returns.

Time is a friend of good businesses and an enemy of ordinary ones. Buying a good company at a reasonable price far outweighs buying a reasonable company at a good price. When buying a company or ordinary Stocks, look for a first-class business with top management.

Interpretation: Concentrated investment focuses on good businesses, while poor businesses should have diversified investments.

We are focusing our efforts on studying what will happen in the future, not when it will happen.

Interpretation: It is possible to predict future events in investment, but it is difficult to predict the timing of those events. One should not think of making money through short-term buying low and selling high, but rather make investments based on changes in the company's fundamentals.

Buffett has always emphasized: do not invest in what is not understood.

Interpretation: The literal meaning is understood by everyone.

Editor/rice

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