Author Topic: Buffett's 50% per year on small sums  (Read 46621 times)

oddballstocks

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Re: Buffett's 50% per year on small sums
« Reply #20 on: October 27, 2016, 09:58:18 PM »


If you're looking at small companies. Then they're probably not very good companies. Because the fact is that compounders compound so good companies tend to get big.


I think this is wrong but taken as religion.  No, there are wonderful small companies, but they're stuck in a niche making excellent non-scalable returns.  This is what most successful businesses find themselves in.  They hit a growth ceiling, but can make phenomenal returns in their little niche.  These are indeed excellent businesses.

Everyone wants a Starbucks or Cisco.  But I'd prefer to own some company making oil filters that has fantastic profit margins, little competition but is limited in how they can grow.

We have a board full of dreamers who are planning for that one day when they're running $5b or $10b. 
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rb

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Re: Buffett's 50% per year on small sums
« Reply #21 on: October 27, 2016, 10:32:16 PM »


If you're looking at small companies. Then they're probably not very good companies. Because the fact is that compounders compound so good companies tend to get big.


I think this is wrong but taken as religion.  No, there are wonderful small companies, but they're stuck in a niche making excellent non-scalable returns.  This is what most successful businesses find themselves in.  They hit a growth ceiling, but can make phenomenal returns in their little niche.  These are indeed excellent businesses.

Everyone wants a Starbucks or Cisco.  But I'd prefer to own some company making oil filters that has fantastic profit margins, little competition but is limited in how they can grow.

We have a board full of dreamers who are planning for that one day when they're running $5b or $10b.
You are 100% correct. I didn't want to get into all the nuances about business in one post. Of course this is what Berkshire initially set out to do. Solve that growth ceiling by buying companies with good ROIC by buying them and engineer growth by taking their cash flow and buy other like companies.

The issue with is that those kind of companies don't really have a reason to be public. Case in point, the companies that BRK bought were private. Now I'm sure that there are cases where these guys are not very good at corporate finance but I didn't say that there are no companies like that. My point was that they would be very rare and definitely not available all the time when one want to go shopping.

kab60

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Re: Buffett's 50% per year on small sums
« Reply #22 on: October 28, 2016, 12:04:22 AM »


If you're looking at small companies. Then they're probably not very good companies. Because the fact is that compounders compound so good companies tend to get big.


I think this is wrong but taken as religion.  No, there are wonderful small companies, but they're stuck in a niche making excellent non-scalable returns.  This is what most successful businesses find themselves in.  They hit a growth ceiling, but can make phenomenal returns in their little niche.  These are indeed excellent businesses.

Everyone wants a Starbucks or Cisco.  But I'd prefer to own some company making oil filters that has fantastic profit margins, little competition but is limited in how they can grow.

We have a board full of dreamers who are planning for that one day when they're running $5b or $10b.
You are 100% correct. I didn't want to get into all the nuances about business in one post. Of course this is what Berkshire initially set out to do. Solve that growth ceiling by buying companies with good ROIC by buying them and engineer growth by taking their cash flow and buy other like companies.

The issue with is that those kind of companies don't really have a reason to be public. Case in point, the companies that BRK bought were private. Now I'm sure that there are cases where these guys are not very good at corporate finance but I didn't say that there are no companies like that. My point was that they would be very rare and definitely not available all the time when one want to go shopping.
If these businesses don't grow, why do you need high ROIC (unless it's because it implies a moat?) I get the attraction to cheap, no-growth companies in a nice niche, but isn't the problem typically that those cashflows don't all get returned (suboptimal capital allocation).

Uccmal

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Re: Buffett's 50% per year on small sums
« Reply #23 on: October 28, 2016, 04:28:51 AM »
The lack of someone actually doing it seems to suggest it is not possible.  Buffett is not the only investment genius and the entire field is vastly more competitive than 60 years ago (when Buffett incidentally wasn't doing 50%.) Between all these board members we would know someone who was doing this and we dont.   Occams Razor. 

Poll says that we have 3 people with 10 years+ of 50% annualized returns...  :o
Just sayin'

(OK, people could be trolling. And for 10 years answer I did not specify how the return should be calculated, and it's possible that the people voting have 50% annual returns interspersed with 50% losses in between. Or maybe we have 3 real Buffetts among us.)  8)

Extraordinary claims require extraordinary proof.  Non?
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DooDiligence

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Re: Buffett's 50% per year on small sums
« Reply #24 on: October 28, 2016, 04:43:49 AM »
The lack of someone actually doing it seems to suggest it is not possible.  Buffett is not the only investment genius and the entire field is vastly more competitive than 60 years ago (when Buffett incidentally wasn't doing 50%.) Between all these board members we would know someone who was doing this and we dont.   Occams Razor. 

Poll says that we have 3 people with 10 years+ of 50% annualized returns...  :o
Just sayin'

(OK, people could be trolling. And for 10 years answer I did not specify how the return should be calculated, and it's possible that the people voting have 50% annual returns interspersed with 50% losses in between. Or maybe we have 3 real Buffetts among us.)  8)

Extraordinary claims require extraordinary proof.  Non?

I had 2 years 2013 (GMCR) & 2014 (EW not sure if this one counts since I made a bundle that year on Calls but didn't actually sell any of the equity until last year & this year)

Either way I attribute both to luck even though I did visit stores & talk to managers re: K-Cup & Keurig machine sales for GMCR & read up on heart disease & valve replacements & competition (mainly Medtronic) for nearly a month before moving on EW.

I agree with you that anyone claiming to be a wizard should either step forward or ask Parsad to remove their vote...
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Patmo

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Re: Buffett's 50% per year on small sums
« Reply #25 on: October 28, 2016, 04:55:24 AM »


If you're looking at small companies. Then they're probably not very good companies. Because the fact is that compounders compound so good companies tend to get big.


I think this is wrong but taken as religion.  No, there are wonderful small companies, but they're stuck in a niche making excellent non-scalable returns.  This is what most successful businesses find themselves in.  They hit a growth ceiling, but can make phenomenal returns in their little niche.  These are indeed excellent businesses.

Everyone wants a Starbucks or Cisco.  But I'd prefer to own some company making oil filters that has fantastic profit margins, little competition but is limited in how they can grow.

We have a board full of dreamers who are planning for that one day when they're running $5b or $10b.

And then you buy it for 3x earnings because the owners are going through a divorce

vinod1

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Re: Buffett's 50% per year on small sums
« Reply #26 on: October 28, 2016, 05:11:11 AM »
If Bill Gates or Steve Jobs or Jeff Bezos said that if they are starting now from scratch they can build a company to transform an industry or grow it to a multi-billion dollar size, most of us would concur in agreement. But we would not think we can do it ourselves or even something we can shoot for.

Buffett makes the comment that he can get 50% returns if he is starting small and we seem to think that is within realm of possibility for, if not for many, at least for some of us. Buffett himself made a comment along these lines in the past.

I think he is an off the chart genius in investing just as Bill Gates and Steve Jobs are in business. So I think having something like 50% return target might be setting up for disappointment.

If you consider the fact that the expected returns on broad equity market is like 4-6% and bond market is 2%, someone making even 10% for next 20 years is going to stand out.

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Patmo

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Re: Buffett's 50% per year on small sums
« Reply #27 on: October 28, 2016, 05:17:43 AM »
I wouldnt be surprised if 50% was a floor year for warren buffet with small money. I'm probably on the opposite side of the spectrum from most fanboys who quote any WEB saying as if it were fact, but the guy is no joke. I'd expect AT LEAST 200 people in NA can pull off sustained 50% returns on small money and no institutional constraints, WEB would be in the higher tier of that group.

Making lots of money on small amounts is deceivingly easy if you have a mindset tailored for it. At that level, talent is still optional (of course, that helps tons though)

Uccmal

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Re: Buffett's 50% per year on small sums
« Reply #28 on: October 28, 2016, 05:26:19 AM »
The lack of someone actually doing it seems to suggest it is not possible.  Buffett is not the only investment genius and the entire field is vastly more competitive than 60 years ago (when Buffett incidentally wasn't doing 50%.) Between all these board members we would know someone who was doing this and we dont.   Occams Razor. 

Poll says that we have 3 people with 10 years+ of 50% annualized returns...  :o
Just sayin'

(OK, people could be trolling. And for 10 years answer I did not specify how the return should be calculated, and it's possible that the people voting have 50% annual returns interspersed with 50% losses in between. Or maybe we have 3 real Buffetts among us.)  8)

Jurgis, as you acknowledge the poll has not been worded right.  Come to think of it, How is the statement by Buffett worded?  Is he claiming he could do 50% once, 50% for 3 years, etc.? 
In its various forms I have seen, Buffett has claimed that if he was running 1-10 million he could get 50% returns...  it is never mentiomed how long. 

Getting 50% returns over 10 years (non-consecutive) historically, can be written off as a statistical fluke far too easily.  Buffett is claiming forward knowledge that he can do it. 
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writser

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Re: Buffett's 50% per year on small sums
« Reply #29 on: October 28, 2016, 05:46:10 AM »
If Bill Gates or Steve Jobs or Jeff Bezos said that if they are starting now from scratch they can build a company to transform an industry or grow it to a multi-billion dollar size, most of us would concur in agreement. But we would not think we can do it ourselves or even something we can shoot for.

I disagree. Bill, Steve and Jeff are obviously very smart and driven but watch out for survivorship bias. These guys were also extremely lucky to be at the right time and place with the right people (Woz!) and circumstances. Without their current wealth, network and reputation I'd say the odds are heavily stacked against them (_anyone_) transforming an industry.

Also, I believe the key to sustainable 50% returns (if possible, consider me skeptical) is to obsessively watch the market and research individual stocks and companies 24/7. Participating in this thread would certainly be detrimental. Might explain why only the sub-50% losers are responding. Too lazy to do the actual work :) .
« Last Edit: October 28, 2016, 06:19:51 AM by writser »
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