Many investors in Singapore might have been glued to their computer screens two Saturdays ago on 30 April.
That’s because the investing maestros – Warren Buffett and Charlie Munger – were on hand to deliver investing wisdom during Berkshire Hathaway’s annual general meeting that was streamed live around the world.
There were a few memorable quotes for investors to chew on from the dynamic duo and I would like to point out three snippets that may be worth your attention.
On the importance of focusing on the long-term
“Well, I don’t think it’s a tragedy that some companies have a slightly better ratio from one period. GEICO has quintupled its market share since we bought all of it. I don’t think we should worry about whether somebody else had a good quarter.”
– Charlie Munger
For context, Berkshire Hathaway completed its acquisition of GEICO, a U.S. auto insurance company, in 1995. Munger’s quote above was in response to a question regarding a GEICO competitor’s better performance in a recent quarter.
Munger’s reply was notable as he widened the timeline for performance measurement from one quarter to 20 years.
As investors, we should guard against recency bias, which is the tendency to place more emphasis on recent results rather than a longer-term track record. The companies that we own may have one bad quarter or even a bad year – but it does not automatically make it a terrible company. Companies can change and adapt over time, therefore we should have the patience to observe developments over the long-term.
On how investing is not about perfection
“That’s true for other things we own, including things we own 100% of, and we’ll be wrong sometimes. We’ll be late sometimes, we’ll be wrong sometimes, but we’ll be right sometimes too. It’s not that we’re not cognisant of threats, but assessing the probabilities of those threats being a minor problem, or a major problem, or a life threatening problem – it’s a tough game but that’s what makes our job interesting.”
– Warren Buffett
Buffett may be widely-acknowledged as one of the best investors – if not the best – of our generation. But he is not immune to committing the occasional error.
Such is the game of investing. As investors, we are looking for situations where the risk-reward relationship favours us. This also means that it is possible that we will be making errors along our investment journey since there are no perfect odds. The good news is that we may not have to be 100% right to earn a decent return from the stock market.
The value of patience
“And so the world changes and we can’t make a portfolio change every time something is a little less advantaged than it used to be.”
– Charlie Munger
Munger also spoke about the competitive positioning of companies. Over time, some companies may not be able to hold their competitive positions as well as in the past. If the competitive gap is narrowing but is non-fatal, we may be better off being patient and observing how companies will adapt.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong owns shares in Berkshire Hathaway.