How Warren Buffett Evaluates a Company

In this video Warren Buffett talks about PetroChina and how to evaluate a company. The host of the show asks Warren Buffett if he sold his entire statement from PetroChina. He says that he sold it, but it was all based on price. He regrets that he sold it a little too sun, but it was a hundred percent a decision based on valuation. When they bought the business, the whole company was selling for thirty five billion. At the time they sold it, it was a very good price, but it was that about eight times that price. He is asked what is his advice for the average person that maybe never bought a stock before.

Warren Buffett says that they have to think about how much is it selling for and how much did they think it's worth. Then he is asked how did he find PetroChina, how did it come to his attention. He was sitting in his office, reading some reports where he found described a very good company about oil reserve, about chemical and everything else. He sat there and read it and he thought to himself that the company worth’s about a hundred billion.

He did not look at the price first, he looked at the business first because if you look at the price first, you are influenced by that. So he evaluates the company first and after that he looks at the price and he sees that the price is less than his estimation so he buys it. But how does Warren Buffett evaluates the company? He thinks at how much would he pay for the whole business. He thinks that PetroChina is the second most highly valued company in the world. He sold his entire state at PetroChina.
Warren Buffett is asked if he would buy or sell a stock based on political pressure. He says that he would not do that. The Chinese Government owns eighty eight percent of China and they also own control of twenty nine of thirty largest companies in China. If you would buy one of these companies, you would have the Chinese Government as majority partner. The only question is if you are responsible for their actions.

Warren Buffett quotes from this video:

  • If you look at the price first, you are influenced by that.
  • I would not buy or sell a stock based on political pressure.
Submitted by YouTube Trader on Tue, 04/06/2010 - 17:04

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