It is used to protect you from ignorance

We believe that the only interest of stock market prediction is to give their letters of nobility to the fortune-tellers, in contrast, long. "It is not this time that Warren Buffett is likely futile exercise of economic prediction. Foresight, it is exercised on companies and not on the situation, that he gave to analyze since long. Net book value per share of its holding company, Berkshire Hathaway, is in not less increased by 19.8 in 2009. It is certainly less than the increase of 26.5 of the & Standard Poor's 500 index.

A demi-surprise, the outputs of recession are generally not too favourable to the investor. In 1975 and 2003, he had thus remained behind of the market (box). However, it is far better than other resistant black years: it has thus gained 10 in 2002 when the stock market (& Standard Poor's 500 index) lost 22. He lost less than 10 in 2008 as Wall Street plunged 37.

In the long term, its very atypical performance stand out blatantly. Between 1965 and 2009, he averaged better twice that index Standard & Poor's 500, with an average annual gain of 20.3 against 9.3 for the broad index of us stocks. Yields that were even persuaded the more skeptical about the real added value that can issue a Manager. Thus, Nobel Prize Paul Samuelson, recently deceased, has been a faithful Berkshire Hathaway shareholder, while he was a convinced of the theory of efficient markets supporter and therefore major difficulties for an investor to do better than the over long period.

Concentrated portfolio

The Warren Buffett portfolio analysis (1) shows that its performance is nothing to chance. The probability that a Manager "beats" the US stock market for more than thirty years is between 0.4 and 0.6.

This is not excessive risk taking which is at the origin of its axing yields, despite a very concentrated and focused on a number style of management limited and securities sectors, its historical approach to investment (read below). High concentration of the portfolio is rather a good sign as to the performance and skills of a Manager, that revealed academic work.

The American Manager goes even further by estimating that, "If you are an investor wise, capable of understanding the science of business, to find five to ten reasonably valued by the market and companies with competitive advantages in the long term, diversification of portfolio you is nothing." It is used to protect you from ignorance. "If you want to be sure of having no bad surprise in relation to the market, you should all possess". In other words, diversification is rather reserved for investors "amateurs".

Values of growth

Warren Buffett prefers "understandable" industries (insurance, industry, local communities, transport... services), which are highly predictable revenues and future profitability and avoiding "those who cannot assess the future, regardless of the interests of their products", explains it in his latest letter to shareholders. Between 1976 and 2006, its highest 5 entries on average represented 73 of its stock portfolio. Its potential for maximum reduction remains limited and restrained despite its high concentration. Its preferred values are most often large values of growth, far Manager image "value" that the market is of him.

This type of Manager likes notably securities whose value market value accounting ratio is high. But the titles of the Warren Buffett portfolio have rather low ratios of this type. "The performance of Berkshire Hathaway stock portfolio does not appear to find its source in the purchase good balance of"massacred"values but in the acquisition of securities which the growth potential is underestimated or overlooked by the market", emphasize Gerald s. Martin and John Puthenpurackal, the authors of the study. Its substantive portfolio values are long, held nearly four years. He acquired an average 3.4 of the outstanding securities of companies with a market capitalization of $ 11.2 billion.

The American investor is now heard by the market, which was not always the case. Thus, the recent announcement of an increase in the participation of Berkshire Hathaway in Sanofi-Aventis, this title had progressed 2.05 in the day. A "effect Buffett" which has been measured and that reflects the notoriety and the influence of the oracle of Omaha on scholarships.