[Mark1808]

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The fuddy duddy FAs on this forum

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Sigh.

Go ahead poker player/investors. Find investing strategies that are easy to implement while you are still playing the horses and poker 12 hours a day, avoid strategies that require actual hard work. Us Fuddy Duddy's will watch for your results with interest...

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Keep in mind that I wasn't calling them fuddy duddies because they were avoiding my more debatable suggestions. It was only the suggestion that they shrink their required discrepancy when that discrepancy can be explained and dismissed, thus giving them more picks, that they are fuddy duddies if they ignore.

As for the fact that my theories seem to indicate that there are winning strategies that don't take that much hard work or expertise, that's just the way it is. There are many, many endeavors where the person who does hard work will be an underdog to someone with only moderate knowledge and work ethic who comes upon a key concept or two that can be utilized against them. I do agree however that while the hard worker should have an open mind, if he is already successful, he should sit back and let others be guinea pigs.

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Warren Buffett took $100,000 and turned it into $50 billion buying stocks. He explained how he did it He scoured financial reports looking for companies with a competitive advantage selling at a significant discount to what an informed buyer would pay for the whole company. His time horizon was basically forever and once he bought a stock he did not let the price influence his decisions. He cited many other disciples with the same mind set who also achieved signicant performance. Why would a casual observer think they could improve on these methods? Bufffet has access to the best minds on Wall Sreet and laughs at trading, leverage, TA, short term trading and most exotiic investments. Either you can do what Buffett does or find someone who can and pay them to manage your money. Trying to use a horse handicapper to devine a system that will improve on Buffett seems extremley naive.

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There are a lot of things wrong with your post.

1. He wasn't a horse handicapper. He was a mathmetician. And he went on to beat the stock market with similar methods that he wrote about. Please read my posts more carefully.

2. I also laugh at all the stuff that Buffett laughs at. I'm concerned that some of the readers here are using my posts as an excuse to believe in nonsense.

3. As long as Buffett stuck to big companies where he had major disagreements with the market price, he didn't need to think about my stuff-as long as he is great at valuing companies and the public sometimes isn't. But what no one is getting here is that in spite of his words, I'm sure he agrees with me. In other words he agrees that the eventual worth, after present value adjustments, of companies he invests in are away from the market pice and toward his price but not ALL THE WAY. This is ridiculously obvious. Otherwise he owns the world. He doesn't mention it because it isn't relevant to him.

4. Almost no one is as good as Buffett at valuing a company and finding large discrepancies. So they have to pay more attention to the market's mindset. In fact Buffett himself might not be able to succeed with his methods as well he used to. The public is probably better now. So even if you are an expert, it is less likely that your valuation will differ as much from the market price. So if Buffett was starting now he would be forced to pick from smaller discrepancies and pay more attention to David Sklansky's Fundamental Theorem of Investing.

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There is much that is wrong with the David Sklansky Fundamental Theorem of investing. The first is that a company's earnings, cash flow and potential are not static. The movement in these variables can far outweigh any current descrepency in price and private market value.

Buffet says that in the short term the market is a voting machine, in the long term it is a weighing machine. This means he does not look at current market prices as representing anything other than a popularity contest. Stocks swing from in favor to out of favor around intrinsic value. The real key to his success though is a competitive advantage. His companies grow earnings at an above average rate which multiplies value over time.

While it may be nice to buy a company at a significant discount to estimated private value if you look at his big investment winners the main key was to identify company’s and management teams with a unique position in an industry that could generate abnormal returns. His gains are NOT a simple movement from undervalued to fairly valued, that is a small part of his gains. The real money has come in identifying companies that can generate abnormal returns because competition is generally limited due in many cases to a company’s brand name that can’t be duplicated at any price.

Market price to Buffett is but a barometer of investor sentiment. He knows what value should be. He stays away from complicated companies or industries he does not understand to eliminate the risk of the market knowing more about nasty suprises than he does. Coke, See's etc are American staples with many decades of earnings growth. He correctly identified many of these brand names as giving a company a unique advantage and could care less how the American public valued these companies.