Warren Buffett on Business and Stocks

Someone in the public asks Warren Buffett what he looks for in a company. He says that the likes only businesses that he understands, he invests only in what he understands because this is going to narrow things down in a quick way. He raises a can of Coke, saying about it that it is easy to understand, being a simple business. Of course, it's not an easy business, but a simple business. A business should benefit from a valuable castle in its center and the castle must be surrounded by a moat. 3 qualities must have the person that runs the business: to be capable, honest and hard-working.

Then, Warren Buffett offers for example Geico company, where people are buying auto insurance. Here, the moat means being the lowest cost producer because people are buy auto insurance based on cost and service, and they think that auto companies are offering the same service, so all the students have to do is to compete on cost. In 1970, everyone thought that Kodak was the best brand in cameras. But, because of an error, Fuji entered into Kodak's castle, where Fuji advertised via the Olympics instead of Kodak. From that moment on, Fuji was seen at the same level with Kodak.

In each day Coca Cola Company goes on a new marketplace, its moat gets bigger. You can't see it growing every day, but Coke's moat is larger that it was in 1970, so you can see it over long-term. Moats may occur as a result of things such as cost, quality, service, patents or real estate location. These things can be found in simple products. In the end, Warren Buffett talks about the internet stock, saying that no one can value it. People are doing something because they find it exciting, so they value the internet stock for that reason, and they are investing in internet stocks for the same reason.

This video is Part 3 of 10 videos of this MBA Q&A Lecture with Warren Buffett. Watch Part 4 of Warren Buffett's Lecture.

Warren Buffett Quotes from this Video:

  • It’s like saving up sex for old age
  • Take a job that if you were independently wealthy you would take
  • There is no one here that can understand the Coca-Cola Company
  • Simple does not mean easy but a company which we can predict long term and one that has a wide economic moat
  • The internet is not going to change how we chew gum
Submitted by YouTube Trader on Sun, 04/04/2010 - 09:33

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