Perhaps a little early to be saying following Charlie into Alibaba ended in tears? The share price since his first purchase might end up being the best thing that could happen due to the price at which the company is able to buy back shares. Nobody should be 'investing' with a 2 year horizon, let's judge in 15 years.
I believe that interview was well after your article was written. After studying the two closely for many years like you have done, I have noticed that they are quick to depreciate themselves and I have many examples where what they have called mistake would be the biggest successes of our careers. I'm not saying that it wasn't or that it won't end in tears, just highlighting the share price performance and the business performance are very different things and in time we might come to realise that indeed it was very astute buying.
The interview was after the article but your point is an argument with Charlie himself, not with me. He considered it an error. I called it like I saw it a few months earlier and, in retrospect, I was correct to do so based on Charlie's subsequent statements. I stand by what I wrote.
Yes you are right, he also considered buying Berkshire an error. They both are very harsh on themselves and call out many errors they have made which were to anyone else genius moves. In some context buying Berkshire was the biggest mistake of Buffetts career but a lot of others would think differently! But currently it sure looks like the both of you are correct. I'm just trying to think 15 years out and if that view could possibly change?
My blind coat tailing adventure started in 2009. I bought BNSF when i read about it on the MF Message board and Dataroma. There was a debate at the time. Some said it was a dumb investment. About the same time the stock market tanked, I found myself controlling a small cash portion of my mother’s estate. I didn’t not know how to value investments, and the only thing I understood, then, in The Intelligent Investor, was Chapter 8. I do want to add that it was a small enough position that I would have made her whole, had the securities tanked. At half what it was only a year before, Berkshire was not going to go to zero. I bought both securities and my mother did more than fine. Someone on the board at the time was incensed that I’d done this. I understood why he felt that way, but there was, in fact, no down-side for my mother, and just a small one for me, so I did it.
Fast forward to 2021 and Charlie buys Alibaba. I nibbled a bit. I hate to say how many times I bought and sold the nibbles on the way down to the mid 100’s. I knew it was a stupid way to buy a company, even if it was Charlie. I finally bailed when I realized no one could figure out Xi and I would not be comfortable even if Charlie was.
Thank you for explaining the perils of coat tailing so clearly. I see where I was “lucky” with my purchase of BNSF, and didn’t know how much. My purchase of Berkshire, though, was, I think, clearly taking advantage of Mr. Market and buying the super-investor’s Berkshire at a bargain.
Coat tailing is not the same thing.
I think this article has made it much more apparent to me why trying to buy any of Berkshire’s or Charlie’s stock picks will not necessarily end well for me, and is a stupid chance to take based on ignorance. I hate to admit it but I am a person who may never know how to value investments, myself, and need to leave it in the hands of the Super-Investor or a fund.
Thanks, again, Ravi, for writing so clearly. (Someday, I’ll figure out and post how much I may have lost by following Charlie! Dear Charlie, still my hero!)
if i respect the investor, i will look at the position but also think independently about it. if i don't respect the investor i don't care what they buy
Many years ago, early 90s, Mr. Buffett commented on investment ideas and people who follow after Berkshire. As I remember it, he wondered why they just didn't buy BRK. He speculated that buying BRK was too easy.
Having used 13-F, 13-G, 13-D filings for decades I will attest to their usefulness, but reliance upon filings would be misplaced. I do use the filings as a confirmation marker but only in the sense of quarter end. Much can, and does, occur within a 45 day period, and while it may be an indicator of sentiment, filings are not conclusive. Initial positions taken, IPO/secondary pot list confirmation, clean up sells and more can be deduced from the filings, but again, never at a max confidence rate. For example, if a followed investor takes a reported at Q end 531,546 share position in XYZ which trades at $20 when an avg pos for the investor would be 10 times that level, it's worth paying attention to. But again, this isn't some Holy Writ.
One other comment: my guess, and I do not know, is that Weschler and Combs can make portfolio decisions at BRK on their own, and Buffett or Munger may or may not be involved directly in that decision. So maybe dispense with the breathless reporting about what Warren did?
Great post. So true. I followed Carl Icahn into CCK last year. I didn't do a deep dive but generally agreed that the company has some upside. This Icahn guy is pretty smart, right? So I looked at Icahn's investment in Newell Rubbermaid. Oof. I am now questioning the CCK position!
The other danger is that the long position may be hedged in a way that you can't see in a 13F. Blind indeed!
Apparently the SEC made a proposal to require disclosure of short positions. There was a comment period last year but I could not find the results of that process. Perhaps it is still under consideration. Misconstruing a long position that is part of a long/short pair trade is a risk when looking at 13Fs.
Perhaps a little early to be saying following Charlie into Alibaba ended in tears? The share price since his first purchase might end up being the best thing that could happen due to the price at which the company is able to buy back shares. Nobody should be 'investing' with a 2 year horizon, let's judge in 15 years.
Well, Charlie himself admitted that it was a mistake in his final interview with Becky Quick. So I'm willing to say it was a mistake as well.
I believe that interview was well after your article was written. After studying the two closely for many years like you have done, I have noticed that they are quick to depreciate themselves and I have many examples where what they have called mistake would be the biggest successes of our careers. I'm not saying that it wasn't or that it won't end in tears, just highlighting the share price performance and the business performance are very different things and in time we might come to realise that indeed it was very astute buying.
The interview was after the article but your point is an argument with Charlie himself, not with me. He considered it an error. I called it like I saw it a few months earlier and, in retrospect, I was correct to do so based on Charlie's subsequent statements. I stand by what I wrote.
Yes you are right, he also considered buying Berkshire an error. They both are very harsh on themselves and call out many errors they have made which were to anyone else genius moves. In some context buying Berkshire was the biggest mistake of Buffetts career but a lot of others would think differently! But currently it sure looks like the both of you are correct. I'm just trying to think 15 years out and if that view could possibly change?
As usual, Ravi, spot on.
My blind coat tailing adventure started in 2009. I bought BNSF when i read about it on the MF Message board and Dataroma. There was a debate at the time. Some said it was a dumb investment. About the same time the stock market tanked, I found myself controlling a small cash portion of my mother’s estate. I didn’t not know how to value investments, and the only thing I understood, then, in The Intelligent Investor, was Chapter 8. I do want to add that it was a small enough position that I would have made her whole, had the securities tanked. At half what it was only a year before, Berkshire was not going to go to zero. I bought both securities and my mother did more than fine. Someone on the board at the time was incensed that I’d done this. I understood why he felt that way, but there was, in fact, no down-side for my mother, and just a small one for me, so I did it.
Fast forward to 2021 and Charlie buys Alibaba. I nibbled a bit. I hate to say how many times I bought and sold the nibbles on the way down to the mid 100’s. I knew it was a stupid way to buy a company, even if it was Charlie. I finally bailed when I realized no one could figure out Xi and I would not be comfortable even if Charlie was.
Thank you for explaining the perils of coat tailing so clearly. I see where I was “lucky” with my purchase of BNSF, and didn’t know how much. My purchase of Berkshire, though, was, I think, clearly taking advantage of Mr. Market and buying the super-investor’s Berkshire at a bargain.
Coat tailing is not the same thing.
I think this article has made it much more apparent to me why trying to buy any of Berkshire’s or Charlie’s stock picks will not necessarily end well for me, and is a stupid chance to take based on ignorance. I hate to admit it but I am a person who may never know how to value investments, myself, and need to leave it in the hands of the Super-Investor or a fund.
Thanks, again, Ravi, for writing so clearly. (Someday, I’ll figure out and post how much I may have lost by following Charlie! Dear Charlie, still my hero!)
Great article. Use 13Fs for inspiration not imitation.
if i respect the investor, i will look at the position but also think independently about it. if i don't respect the investor i don't care what they buy
Many years ago, early 90s, Mr. Buffett commented on investment ideas and people who follow after Berkshire. As I remember it, he wondered why they just didn't buy BRK. He speculated that buying BRK was too easy.
Having used 13-F, 13-G, 13-D filings for decades I will attest to their usefulness, but reliance upon filings would be misplaced. I do use the filings as a confirmation marker but only in the sense of quarter end. Much can, and does, occur within a 45 day period, and while it may be an indicator of sentiment, filings are not conclusive. Initial positions taken, IPO/secondary pot list confirmation, clean up sells and more can be deduced from the filings, but again, never at a max confidence rate. For example, if a followed investor takes a reported at Q end 531,546 share position in XYZ which trades at $20 when an avg pos for the investor would be 10 times that level, it's worth paying attention to. But again, this isn't some Holy Writ.
One other comment: my guess, and I do not know, is that Weschler and Combs can make portfolio decisions at BRK on their own, and Buffett or Munger may or may not be involved directly in that decision. So maybe dispense with the breathless reporting about what Warren did?
Great post. So true. I followed Carl Icahn into CCK last year. I didn't do a deep dive but generally agreed that the company has some upside. This Icahn guy is pretty smart, right? So I looked at Icahn's investment in Newell Rubbermaid. Oof. I am now questioning the CCK position!
The other danger is that the long position may be hedged in a way that you can't see in a 13F. Blind indeed!
Apparently the SEC made a proposal to require disclosure of short positions. There was a comment period last year but I could not find the results of that process. Perhaps it is still under consideration. Misconstruing a long position that is part of a long/short pair trade is a risk when looking at 13Fs.