{"id":10455,"date":"2022-12-07T23:56:00","date_gmt":"2022-12-07T15:56:00","guid":{"rendered":"https:\/\/www.granitefirm.com\/blog\/us\/?p=10455"},"modified":"2024-07-12T18:33:03","modified_gmt":"2024-07-12T10:33:03","slug":"buffett-investment-idea","status":"publish","type":"post","link":"https:\/\/www.granitefirm.com\/blog\/us\/2022\/12\/07\/buffett-investment-idea\/","title":{"rendered":"What helps Buffett to get his investment idea?"},"content":{"rendered":"\n<p>In Berkshire Hathaway&#8217;s 2003 shareholder meeting, Buffett unveiled how he get his investment idea.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #ffffff;color:#ffffff\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #ffffff;color:#ffffff\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/12\/07\/buffett-investment-idea\/#What_helps\" >What helps<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/12\/07\/buffett-investment-idea\/#Reading\" >Reading<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/12\/07\/buffett-investment-idea\/#Business_journals\" >Business journals<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/12\/07\/buffett-investment-idea\/#Things_not_help\" >Things not help<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/12\/07\/buffett-investment-idea\/#Company_visiting\" >Company visiting<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/12\/07\/buffett-investment-idea\/#Buffets_way\" >Buffet&#8217;s way<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/12\/07\/buffett-investment-idea\/#Wall_Street_perception\" >Wall Street perception<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/12\/07\/buffett-investment-idea\/#Peter_Lynch_is_an_outlier\" >Peter Lynch is an outlier<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/12\/07\/buffett-investment-idea\/#Influenced_by_Graham\" >Influenced by Graham<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/12\/07\/buffett-investment-idea\/#Analyst_reports\" >Analyst reports<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/12\/07\/buffett-investment-idea\/#Related_articles\" >Related articles<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_helps\"><\/span>What helps<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Reading\"><\/span>Reading<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><br>Buffett said: &#8220;He reads a lot and knowledge accumulates \u2013 reads a lot of 10-Ks, earnings conference call.&#8221;<\/p>\n\n\n\n<p>In addition to Chevron (ticker: CVX), Buffett only increased his stake in Occidental Petroleum (ticker: OXY) aggressively in the first quarter of this year, and his shareholding ratio has been raised to 15%. Accurately grasp the time before the big rise, and see the opportunity to increase.<\/p>\n\n\n\n<p><a href=\"https:\/\/coinyuppie.com\/2022-buffett-shareholders-meeting-highlights-500-words-condensed-into-five-and-a-half-hours-of-qa-points\/\" target=\"_blank\" rel=\"noreferrer noopener\">When Buffett talked about his investment in Occidental Petroleum at this year&#8217;s shareholders meeting<\/a>, he said that Occidental Petroleum&#8217;s annual report was very good, so he decided to invest in it. He claimed to have acquired 14% of the latter&#8217;s outstanding shares, valued at more than $7 billion, in the first two weeks of March, leaving only 60% of Occidental&#8217;s shares in circulation. He also pointed out that when index funds that own a large stake in Occidental are included, the stake is actually larger (about 20%).<\/p>\n\n\n\n<p><a href=\"https:\/\/www.cnbc.com\/2022\/03\/17\/warren-buffett-scoops-up-another-1-billion-in-occidental-shares-bringing-total-stake-to-7-billion.html\" target=\"_blank\" rel=\"noreferrer noopener\">Buffett told CNBC<\/a> he decided the weekend before to start buying after reading a transcript of Occidental\u2019s Feb. 25 earnings conference call. \u201cI read every word, and said this is exactly what I would be doing. She\u2019s [CEO Vicki Hollub] running the company the right way,\u201d Buffett told CNBC.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Business_journals\"><\/span>Business journals<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Both Buffett and Munger said : &#8220;They read business journals, newspapers.&#8221;  Munger said: &#8220;Wall Street Journal is indispensable.&#8221;<\/p>\n\n\n\n<p>Buffett has said before that he (as a young man) used to read the paper S&amp;P Ratings Stock Guide, Value Line, Moody&#8217;s (ticker: MCO) Business Guide; he also said that he now uses an iPad to read business news online. And because Berkshire&#8217;s main business is insurance, he also reads journals in the insurance industry, and suggested that the best way to understand an industry or become an expert in that industry is to read the top industry journals in that field.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Things_not_help\"><\/span>Things not help<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Company_visiting\"><\/span>Company visiting<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Buffets_way\"><\/span>Buffet&#8217;s way<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Back in his twenties, he visited companies but today relies on almost exclusively publicly available info. He said: &#8220;He does not find it particularly useful to talk to management \u2013 they aren&#8217;t necessarily the best info source.&#8221;<\/p>\n\n\n\n<p>When they buy business, they&#8217;ll check out management but \u201cdon&#8217;t give a hoot about management projections\u201d(meaning don&#8217;t fully trust the company&#8217;s management)<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Wall_Street_perception\"><\/span>Wall Street perception<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>This point is completely different from the views of most investors, because Wall Street generally believes that face-to-face communication with corporate management is a prerequisite for substantial investment in listed companies.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Peter_Lynch_is_an_outlier\"><\/span>Peter Lynch is an outlier<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>As far as the more famous investment gurus are concerned; Peter Lynch is one of the very few well-known investors who is diligent in visiting corporate management. He once mentioned that he has visited hundred of listed companies, and his energy and seriousness are few. Peter Lynch, in fact,  is a very peculiar investment master in many ways, and this is one of them.<\/p>\n\n\n\n<p>The other is that when he was a fund manager, his investment was extremely diversified, which was different from most investment masters, but this was because of his work. However,  he reminded retail investors to concentrate rather than diversify their investments. I discussed this matter in the book &#8220;<a href=\"https:\/\/www.books.com.tw\/products\/0010889106?sloc=main\" target=\"_blank\" rel=\"noreferrer noopener\">The Rules of Super Growth Stocks Investing<\/a>&#8220;, and this part can also be found in my  post &#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/06\/21\/why-long-term-investment\/\" target=\"_blank\" rel=\"noreferrer noopener\">Why long-term investment is better?<\/a>.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Influenced_by_Graham\"><\/span>Influenced by Graham<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>It is also worth mentioning that Buffett&#8217;s mentor Graham is a well-known investor who advocates that there is no need to visit the company&#8217;s management. The main reason is that he only reads financial reports to judge investment opportunities, and basically he will not hold a company\u2019s stock for too long\u2500\u2500\u2500this investment method is called the cigar butt investment method (see my article for details <a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/11\/07\/cigar-butt-investment\/\" target=\"_blank\" rel=\"noreferrer noopener\">&#8220;Problems with Cigar Butt Investment<\/a>). Buffett also used this method to invest in the early days, so he may also be partially influenced by Graham.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"150\" height=\"98\" src=\"https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2022\/07\/b-1.jpg\" alt=\"investment idea\" class=\"wp-image-11814\"\/><figcaption class=\"wp-element-caption\">Buffett <\/figcaption><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Analyst_reports\"><\/span>Analyst reports<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Buffett never read analysts reports. Buffett said \u201cthey&#8217;ll read&#8217;em if funny papers aren&#8217;t available.\u201d<\/p>\n\n\n\n<p>He once complained that people he didn&#8217;t know often sent him some analyst reports and recommended certain stocks, which really troubled him. <\/p>\n\n\n\n<p>When a media reporter asked him how to obtain necessary information about companies, he answered very briefly: &#8220;<strong>We read the annual report of listed companies, that&#8217;s all.<\/strong>&#8220;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Related_articles\"><\/span>Related articles<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/04\/27\/buffett-portfolio\/\" target=\"_blank\" rel=\"noreferrer noopener\">The commonalities of Buffett portfolio \u2013 cheap, fixed income, repurchase<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/04\/07\/buffett-deserves-study\/\" target=\"_blank\" rel=\"noreferrer noopener\">Why Buffett deserves further study?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/12\/07\/buffett-investment-idea\/\">What helps Buffett to get his investment idea?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/08\/10\/reading-is-irreplaceable\/\" target=\"_blank\" rel=\"noreferrer noopener\">Reading is irreplaceable and necessity of for investors<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2022\/01\/12\/are-analyst-reports-useless\/\" target=\"_blank\" rel=\"noreferrer noopener\">Are analyst reports useless?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/06\/21\/why-long-term-investment\/\" target=\"_blank\" rel=\"noreferrer noopener\">Why long-term investment is better?<\/a>&#8220;<\/li>\n\n\n\n<li><a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2021\/11\/07\/cigar-butt-investment\/\" target=\"_blank\" rel=\"noreferrer noopener\">&#8220;Problems with Cigar Butt Investment<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/12\/14\/buffett-hold-for-long-haul\/\" target=\"_blank\" rel=\"noreferrer noopener\">Is Buffett no longer hold for long haul? TSMC, HP, and US Bancorp cases study<\/a>&#8220;<\/li>\n<\/ul>\n\n\n\n<p><em><strong>Disclaimer<\/strong><\/em><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><em>The content of this site is the author\u2019s personal opinions and is for reference only. I am not responsible for the correctness, opinions, and immediacy of the content and information of the article. Readers must make their own judgments.<\/em><\/li>\n\n\n\n<li><em>I shall not be liable for any damages or other legal liabilities for the direct or indirect losses caused by the readers&#8217; direct or indirect reliance on and reference to the information on this site, or all the responsibilities arising therefrom, as a result of any investment behavior.<\/em><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Where does Buffett get his investment idea? In Berkshire Hathaway&#8217;s 2003 shareholder meeting, Buffett unveiled how he get his investment idea.<\/p>\n","protected":false},"author":1,"featured_media":11814,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11,50,15,43,540],"tags":[48,49,744,153,745],"class_list":["post-10455","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-buffett","category-benjamin-graham","category-charlie-munger","category-peter-lynch","category-reading","tag-brk-a","tag-brk-b","tag-cvx","tag-mco","tag-oxy"],"_links":{"self":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/10455","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/comments?post=10455"}],"version-history":[{"count":35,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/10455\/revisions"}],"predecessor-version":[{"id":23343,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/10455\/revisions\/23343"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media\/11814"}],"wp:attachment":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media?parent=10455"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/categories?post=10455"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/tags?post=10455"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}