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Wednesday, October 26, 2005

some rambling on Oct 26

I talked to a family member yesterday who asked why every stock mentioned is a "don't buy". And the funny thing is that for every stock mentioned here there are probably 30 or more that didn't even make it onto the blog. So far that's been perhaps 2,000 (UPDATE: probably closer to 3,000). My goal is to find the best 5 or 6 investments I can find. Once I find them, I'm done until some of them start reaching full value, and then I start the process over again. Mostly this will mean revisiting stocks I looked at previously. A lot of investment knowledge is cumulative.

Warren Buffett recently mentioned that he personally went through thousands of pages of stocks in 1951.
Back in 1951 Moody's published thick handbooks by industry of every stock in circulation. I went through all of them, thousands of pages, motivated by the hope that a great idea was just on the next page. I found companies like National American Insurance and Western Insurance Securities Company that nobody was paying attention to that were trading for far less than their intrinsic values. Last year we found a steel company on the Korean Stock Exchange that had no analyst coverage, no research, but was the most profitable steel company in the world.
I'm trying to do the same thing with the Pink Sheets and OTC BB. No matter how much experience I have with large amounts of information, it's still fairly overwhelming. But focus and determination are very effective.

Deli, I'm trying to do exactly the same sort of thing. With the very same Buffett anecdote in mind, I'm going thru stocks on Yahoo finance, starting with market caps <10 mill and working my way up stock by stock.
As I've mentioned before, I find it ironic that Buffett has laid it all out for people as to how he was successful when he ran relatively small amounts of money. The method is described, and it is no more complicated than "keep turning over these rocks in the wasteland of unknown micro cap and unnoticed small cap companies, and search methodically and throughly for unrecognized value. That's it."
Yet the BRK board still wants to debate WMT v. BUD.
Keep it up, you're an inspiration.

Thanks. Yeah, it's funny how people focus on what Buffett is doing now with Berkshire vs how he invested with "small" amounts of money. I did the same thing with Yahoo Finance for a long time. I also tried looking at all SEC filings for that day (well, trying look at as many as possible).

Turning over rocks is not glamorous, it's not very fulfilling in terms of learning Great Things, it can be very demotivating when you go for long stretches without finding anything good, and it's hard work. But I find that I learn a lot by looking at vast numbers of businesses, and it's a very different kind of knowledge than what they like to discuss on the BRK board. The book Blink by Gladwell is an outstanding look at the kind of knowledge you get from large amounts of experience.

Sometimes I'm afraid that all those investors will suddenly start turning over rocks and people like us will be in trouble. But I don't think that's going to happen.
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