Ding Feng·guan | Wang Xiaogang: Investment Insights on Buffett
Author: Ding Feng Capital Partners, deputy general manager Wang Xiaogang
This year's Buffett shareholders meeting will be held in Omaha on May 6. In 2012, I personally went to the scene. This year, under my proposal, Ding Feng sent two outstanding researchers to “blessing.”
Pakistani God is 87 this year. His partner, Munger, is already 93 years old. The shareholders' meeting hosted by two elder ones is still bursting with sparks of wisdom. I suggest we all have the opportunity to go to the scene and listen to their speeches.
Before the conference, I collected some of Buffett's information and shared it with everyone:
1 Some data on Warren Buffett
(I estimate based on the public report)
How bright is the halo?
According to Forbes's data as of April 30 this year, Buffett’s net worth of $68.5 billion represented the highest net worth of anyone with an investment career, and is the world’s second richest person after Gates. Although Peter Lynch, Soros, and Anthony Bolton, who are known as the masters in the investment community, are also very bullish, they are the stars in the sky compared with Buffett, and Buffett is the moon.
How much performance?
Buffett began his career record at the age of 27, 1957, reaching 62,740 times in 60 years and compounding 20.215%. (A post-1967 performance record is the change in the net assets per share of its controlling Berkshire company).
How long is the investment history?
He started trading at the age of 11 and began to record at the age of 27. At the age of 87 this year, stocks were 77 years old, and his performance record was 60 years. He should be the longest record holder of historical performance ever.
How much is the donation?
In 2006, Buffett donated 85% of Berkshire's own equity and 37 billion US dollars in market value to the Gates Foundation. He was the largest single record holder of human history.
2 Myths that continued without losses continued for 42 years
The myth that Buffett’s public performance began to decline from the age of 27 has continued until 70. It was not until his 71-year-old hit the 2001 Internet myth that it had fallen for the first time, with a drop of only 6.2%; the other time in the 2008 global financial crisis, the net value fell by 9.6%.
Think of what Buffett said: The first is not a loss; the second remembers the previous one. (Some write Buffett's personal stock account has plunged more than 50% in 1974, when the S & P 500 fell 26%, but Berkshire's net assets per share rose 6%, it can be understood as public performance did not fall).
Berkshire Change in Net Asset Value per Share (from Berkshire 2016 Annual Report http://www.berkshirehathaway.com/2016ar/2016ar.pdf)
3 After the 70-year-old performance gradually flat
Buffett's 60-year career can be divided into the first 42 years (1998) and the latter 18 years. In the previous 42 years, the compound interest was 25.47%, the net value rose from 1 to 13762; the compound interest was 8.8% in the latter 18 years, and the net value increased from 13762 to 62740, which only increased by 356%. In the last 18 years, net value rose by more than 20% to 21% in 2003 alone. There were losses in both 2001 and 2008. This is also the only two losses in his 60-year career, but there is another 6 years of net worth. Increase to single digits.
Buffett was 69 years old in 1999. Although we sincerely wish the God of God a long and healthy life, from the perspective of investment performance, the compound interest rate of 8.8% in the last 18 years has been unimpressive.
It is respectful to work for an old man who is nearly 90 years old. At the end of 2016, the total assets of the company have grown to 620 billion U.S. dollars. For such a huge asset company, how much growth we can expect?
This incident has given me an inspiration: Even though he is in good health and still loves investment work, he should still retire at the age of 70.
4 Buffett's stock picking strategy
Buffett’s early focus was on the value philosophy of his teacher, Graham. After learning about Munger, he mainly used Hakuba growth stocks such as Coca-Cola, Washington Mail, and Gillette. Since 2000, he has no investment technology leader, nearly 1-2. Year started investing in APPLE and so on.
In 1988, Buffett bought a stock he earned the most money in his lifetime: Coca-Cola. Cumulative buying of Coca-Cola amounted to 1 billion U.S. dollars. By 1998, Coca-Cola shares had made a profit of 12 billion U.S. dollars.
In 1990, Buffett concluded: "This type of investment - finding superstar stocks - provides us with the only opportunity to become truly successful." (But this investment approach - searching for the superstars - offers us our only chance for real success.) (letter to shareholders 1991)
This shows that the gathering of superstar stocks has only made Buffett's success and greatness a success. Compared with the teacher's "smoke-type" strategy, investing in "super-star stocks" is the fundamental reason that Buffett is better than blue.
For superstar stocks, Buffett summarized several features, one of which is an important one: the prospect of sustained earnings growth. Isn't this what we call growth?
5 What does Buffett's investment experience prove?
The power of compounding
If it can achieve an annual compound interest of about 20%, it will rise from 1% to 6.19% every 10 years, and for 60 years it will reach about 60,000 times. In other words, even if you are 20 years old, only 10,000 yuan, 80 years of age to maintain such a compound growth rate, there will be 600 million.
If annualized compound interest is 25.89%, from 1% to 10% every 10 years, from 1 to 100% every 20 years, if you give your child 1 million investment, can he get 100 million in 20 years?
Investment sustainable profit
Many people believe that profit from investing is gambling. There is too much randomness, but Buffett's track record is open and continuous. This proves that if investors can master the correct strategy, they can continue to obtain better returns.
Of course, there are relatively few cases of such success and more cases are needed to prove it.