found this classic lecture at this link …enjoy !!
buffett’s lecture at notredame – 1991
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Risk Reward ratio not in favor of investors at 7400 levels
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Read this interview of chetan parikh (he runs the excellent website capitalideasonline ). He is an exceptional investor from the graham – buffett school of investing and among the few investors whose views i respect.
The complete interview is available in moneycontrol website
http://news.moneycontrol.com/backends/News/frontend/news_detail.php?autono=174200
some snippets below
He says, “I would be comfortable with the levels being below 6000, because if the market goes below the 5500-6000 levels, there would be a lot more trading opportunities. But at this point of time in the market, it is difficult to find stocks with a large margin of safety.”
He adds that, a good band of trading for the market would be between 12-18 times earnings, and on that basis the Sensex should be anywhere between 5000-8400 levels.
Parikh says, “At the 7300 levels, the risk reward is not in favour of investors. This does not mean that the markets cannot go up, because on liquidity the markets can go even upto 8000 levels and past that. But from the risk management point of view, the odds are not in favour of the investors, from a one year perspective.”
He says, “My sense is that the operating margins have peaked, and going forward, operating margins could come under pressure. A whole lot of companies have gone in for capital expenditure, and therefore the return on capital employed will come down. We are also seeing the bottom of the interest rate cycle, so there will be a pressure on margins, on return on net worth and capital employed, in the future.
i would completely with his analysis on the return on capital and other fundamentals. The BSE sensex stocks at an aggregate are returning 20 % + ROE (with the past no.s around 16-18 % at best ). So although the pe are not high , i would kind of wary of putting any more money. on the contrary i have started looking at reducing some of my holdings which seems to be get in the over valued territory.
Investing rules from Jim Rogers
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Read a very good article on Jim Rogers in capitalideasonline.com . He was a partner with gorge soros , i think, and has published quite a few good books like investment biker etc .
The link is given below
http://www.capitalideasonline.com/articles/index.php?id=1554
some excerpts
Rule 1: Do your own work. Don’t be afraid of being a loner.
“I learned early in my career that if you read the annual reports, you’ve done more than 90% of the people on Wall Street. If you read the notes to the annual report, you’ve done more than 95% of the people on Wall Street, and if you actually sit down and do a spread sheet, you’ve done more than 98% of the people on Wall Street.” (emphasis mine)
Rule 2: Good investors need a historical perspective.
Rule 3: Think conceptually about the world.
Rule 4: Don’t buy stocks at high multiples.
“I don’t buy them because, by the time they reach a high multiple, it’s probably about time for it to come to an end. Wall Street and politicians are the last to catch on to anything,” said Jimmy. He doesn’t sell a stock just because it happens to have a high multiple. He either waits for a fundamental change or for an indication that something is about to go wrong.
Rule 5: Be selective in your investing and look for one good idea.
“The most important trick for getting rich on Wall Street is not to lose money. There are many guys,” he said, “who do well for two years and then get creamed. Wait until you have a winner and are sure. In the meantime, keep your money in treasury bills. Professional money managers feel that they have to do something all the time and are the worst at following this advice.
“Even if you only have one play every ten years, you’re going to do a lot better than most people.”
Rule 6: Every investment should be considered a commodity that will be affected by supply and demand changes. It’s just a question of when.
Everything has its own supply and demand cycle, which may be a twenty-, thirty-, or fifty-year cycle, and everything is basically a commodity in the end. American Standard was a great growth stock when people went from outdoor to indoor plumbing, but it isn’t considered one today. Avon, a cosmetics firm, boomed after the war when the country became more affluent. By the late Sixties, Avon had a multiple of 50, and the market was saturated with many competing cosmetics brands.
Rule 7: Every investor should lose some money, because it teaches you about yourself
Buffett’s speech to students at univ of Florida
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A free link to the video was posted at www.fool.com by a board member. i have put the link below
http://tinyurl.com/c85or
several very interesting comments by buffett
1. why smart people do dumb things – buffett discussed about the LTCM episode. how a bunch of very smart people with very high IQ and knowledge, managed to blow up everything they had. i like the statement – ‘why risk what you have and need for what you dont have and dont need’ ? i think this statement is very important to an investor. just think about it …if i am well off , why do i need to risk my networth for a few extra percentage points and if i am poor , i cannot afford to do it. i guess it makes sense to invest conservatively (in companies with strong competitive advantage )
2. buffett discusses at length the economics of coke / see’s and p&g. this was in response to a question on what is it he looks in a business. buffett discusses in detail about the what qualitative factors one should look for in a business. One new point which struck me and kept me thinking is buffetts reference to the pricing power of a company. companies with strong pricing power like coke tend to have a very formidable competitive advantage. in comparison commodity companies have poor or no pricing power (except during supply shortage )
3. buffett also discussed about reit investment and how although the discount to book looks enticing , but is justified due to inability of such companies to move / sell the big amount of real estate on their books
4. buffett talks of various other topics (which he has repeated in several other forums) , like developing good habits (example of taking a 10 % option on your classmate ), not prediciting the market etc
5.buffett also talk of the ‘important and knowable’ v/s ‘important and unknowable’ , when some one asked his opinion on interest rates. he pointed out that is better to focus on the first and get into good companies than worry about the second and let go of opportunities.
a very good speech and worth the 1.5 hours (in addition it is free)