Saturday, January 27, 2007

Back in the days of dinosaurs




Value was so compelling that even a caveman could recognize it.

Moody's writeup from 1951, thanks to Shai Dardashti

So how did Buffett find this company? My guess is that it's the same story then as today, effort. He read everything, three or four newspapers a day, and every page for every stock in Moody's (and later Valueline), until he finally found something this stinking obvious.

So if you like to complain about how few good ideas are out there, compare your effort to Warren's. I'll bet you come up a little short in the comparison.

1 comment:

Randy said...

I think this deal was extraordinary, even for Buffett. And stuff that cheap might be impossible to find today. I do know a guy in Texas who seems to have a knack for digging up extraordinarily cheap equities. But the closest I have ever seen was Bayou Steel. He found it trading for a 4 PE, and it was taken private at a 9 PE six months later.

Your Apple example is much easier to find. There are often cash rich companies trading near the value of their cash hoards because the market no longer believes in their business. Your results can vary from a value trap (slowly burning the cash and declining in value without ever fixing the business) to Apple.