Mr. Buffett

With utmost respect, Buffett's ideas may not be valid to us, today's common retail investors for the following reasons.

* We do not make big bets like buying most of a company.
* He cannot buy value stocks with small cap that proves to perform best.
* In many cases, his bets require him or his company to run the company.
* He has connections and sweetheart deals that most of us do not have access to.
* We can dump losers or winners any time we want without public opinions.
* Most of his bets require him to pay extra to get in and get out.

There are exceptions. If you follow him to buy Chinese Petro. (I did) and the Chinese auto company (I could not find any US exchange that listed it), you do good.

Contrary to Mr. Buffett's philosophy, I believe after 2000 buy-and-hold is dead. Most books/articles defending buy-and-hold based on data before 2000. The market changes so fast that a good company could not be profitable due to circumstances beyond its control.

I still buy the company whose technology I do not know, but learn its technology and its impact to the company's bottom line. I believe some companies will die eventually like Washington Post he owns unless they move out from the paper product. If I were him, I would sell it after we know internet will replace newspaper to a good extend. It is more fundamental than market timing.

He was doing great with Coke in the first 10 years he owned, but it has not been exceptional in the next 10 years.

He has about 50% of the profit from the insurance company. We should have better diversification than that. Insurance sector is a black swan to me - when something unexpected happens, it would spoil all the fun.

For the past 3 years, my largest account (based on 1/31/11, so a month off) beats Buffett by 100% - his cumulative profit is 22% and mine is 50%). It could be just luck. I just want to prove a point that we can beat Buffett easier as a retail investor today. We do have advantages as a small retail investor. I'm a nobody and remain so, so I do not do it for fame and glory.

If Buffett only handled a portfolio of $5 millions or so, he would beat me year after year by a good margin. No one including Peter Lynch can make a decent return with the huge size of Buffett's portfolio. Lynch quit and Buffett continues. We have to respect Buffett for that even he collects good salary. I also respect him for donating most his money to charities and how he taught his children on money and life.

However, there are many sound investing philosophy/ideas we can learn a lot from him and he has proven to be the greatest investor in our generation. He gets my respect by managing such a large portfolio that is hard to beat the market as he is the market.

From his own account, he could be very different as it would be small enough to achieve a higher return. Due to the conflict of interest, I do not think he can have his own account. I hope he would share his secrets in a book before he dies.

He did a great job raising his children to be independent. I do not agree his advice to the Chinese girl to be a business man instead of a doctor who would cure thousands.

Related links.
Debunking some of Buffett's preachings - some are duplicated here.

Efficient donation to charities.


(c) TonyP4 2011. Written in 7/8/10. Updated 7/8/11.

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Disclaimer: All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.