What You will Learn at the Mary Buffett Seminar
Following are examples of three specific skills that will be taught at the Mary Buffett Seminar in Beijing, October 11, 12 and 13, 2010. They are: determining the value, identifying durable competitive advantage, and choosing the time.
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1. Warren Buffett’s Method of Determining the Value of a Company
Warren Buffett does not invest in stocks. He invests in businesses. He asks himself, “Would I buy this entire business for this price, work for it and manage it, and stake my financial future on the result?” He uses a specific method of determining the intrinsic value of a company that is quite different from what is taught in business school. His method requires basic knowledge of a financial balance sheet, and application of some simple financial math. The elements examined include assets, liabilities, long-term and short-term debt, earnings after taxes and other items. We will teach the formula, how to apply it, and walk through some specific examples and case studies.
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2. Warren Buffett’s Method of Identifying Durable Competitive Advantage
Financial measures are not the only factor that Warren Buffett uses before deciding to invest in a company. He looks for a durable competitive advantage — elements of the company?s brand, product and marketing strategy, distribution, product development cycle and public image, and the character of management, which make the company’s products a dominant necessity for its customers and protect its premium pricing. Regardless of swings of market conditions or economic cycles, people want and need these products and they prefer to buy them from a trusted, familiar source. The value of such a company will remain stable and continue to grow. This seminar will examine durable competitive advantage in depth, give concrete examples of products that have it and products that don’t, and how to tell the difference.
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3. Warren Buffett’s Method of Determining Discount to Market Valuation
Even with solid financials and a durable competitive advantage, Warren Buffett is still not ready to invest. The equities he purchases must be selling at a significantly lower price than the intrinsic value of the company. For well-managed companies, this is a rare event, because markets are usually very efficient in matching value to price. However, occasionally even a strong company will suffer a decline in its stock price — because of a general run on equities in a financial crisis, because of a public relations problem or product recall, because of a perception by the market that a competitor is better. Warren knows how to determine the difference between a temporary decline in stock price, and a real systemic problem in the company. He understands how to determine the correct discount to value, based on the past and projected growth rate, which will achieve his investment objective over time. So he finally knows when to invest, and at what price. The measures he uses, and the reasoning he employs, will be taught in this seminar.
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This chain of reasoning is similar to what everyone does when we make a significant purchase in life. When buying a new refrigerator, an automobile, a diamond ring, or a house, we all consider the value, the brand, the time and the price. Warren Buffett’s decision-making process for buying stocks is a little more complex, and involves more numbers — but it is well within the capability of the average investor.
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This seminar will teach how an individual or institutional investor in China can develop and increase wealth over time, as Warren Buffett did, through a combination of discipline, skill, insight and patience.
