Author Topic: When were the times Buffett "market timed?"  (Read 2752 times)

NeverLoseMoney

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Re: When were the times Buffett "market timed?"
« Reply #10 on: February 10, 2018, 05:46:35 AM »
This sounds a bit like market timing. From chapter 28 (Dry Tinder) of The Snowball:

"The conflict he was beginning to feel was a struggle to find investments for the partnership. He had managed to find some of the few undervalued stocks that still paraded through the Standard & Poor’s weekly report: Employers Reinsurance, F. W. Woolworth, and First Lincoln Financial. He’d also bought some stock in Disney after meeting Walt Disney and seeing the entertainment showman’s singular focus, his love of his work, and the way these had translated into a priceless catalog of entertainment. But the concept of “great businesses” had not entirely sunk in, and he didn’t load up. Instead, he bought more Berkshire, and built a $7 million “short” position in stocks like Alcoa, Montgomery Ward, Travelers Insurance, and Caterpillar Tractor—borrowing the shares and selling them against the risk that the market would plunge."

And the footnote that goes with it: "Buffett and his chief administrative officer John Harding chose a set of representative large-cap stocks, in effect creating a market index. Buffett did not want to execute the trade through a brokerage firm because the broker kept the proceeds from the sale and paid no interest to him. Harding contacted university endowment funds. Buffett went personally to Chicago to get shares. The idea of lending directly to a short-seller was so novel at the time that most universities passed. However, Harding was able to borrow about $4.6 million of stock."


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Tim Eriksen

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Re: When were the times Buffett "market timed?"
« Reply #12 on: February 10, 2018, 08:15:43 AM »
Quote
By its nature,  value investing is market timing for the most part.
Agree. Not just price. If "only price" were true you could sit on an investment for years w/o showing Buffett's 20+% returns. Have seen this first-hand waiting on cigar puffs to yield large gains. Prior to, there were many years of zero yield crops. Shouldn't a value investor try to assess which catalyst will catapult price? And once established, shouldn't the "when" question follow?

Cigar butts often aren't growing intrinsic value.  Thus the discount is deceptive.  Looking for a catalyst in a stock, or becoming it in Sandborn Maps, is not market timing.  Market timing is basing your decision to buy based on overall market valuation and/or direction.         

rros

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Re: When were the times Buffett "market timed?"
« Reply #13 on: February 10, 2018, 09:05:37 AM »
Quote
By its nature,  value investing is market timing for the most part.
Agree. Not just price. If "only price" were true you could sit on an investment for years w/o showing Buffett's 20+% returns. Have seen this first-hand waiting on cigar puffs to yield large gains. Prior to, there were many years of zero yield crops. Shouldn't a value investor try to assess which catalyst will catapult price? And once established, shouldn't the "when" question follow?

Cigar butts often aren't growing intrinsic value.  Thus the discount is deceptive.  Looking for a catalyst in a stock, or becoming it in Sandborn Maps, is not market timing.  Market timing is basing your decision to buy based on overall market valuation and/or direction.       
Thank you for that clarification.

stahleyp

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Re: When were the times Buffett "market timed?"
« Reply #14 on: February 12, 2018, 03:26:57 PM »
Thanks all. I seem to remember him saying that one should only be out of stocks a few times in one's career (though that isn't verbatim and I could not be remembering it correctly). If someone is 100% in bonds (for an equity investor), I don't see how that isn't market timing. There were stocks that did well in 2008 - Fairfax for example.

Al, he hasn't said anything like that to my knowledge. It's more for trying to understand why he's done it in the past.
« Last Edit: February 13, 2018, 08:53:05 AM by stahleyp »
Paul