{"id":17843,"date":"2023-04-27T23:56:00","date_gmt":"2023-04-27T15:56:00","guid":{"rendered":"https:\/\/www.granitefirm.com\/blog\/us\/?p=17843"},"modified":"2024-07-12T18:01:17","modified_gmt":"2024-07-12T10:01:17","slug":"predictabe-buffetts","status":"publish","type":"post","link":"https:\/\/www.granitefirm.com\/blog\/us\/2023\/04\/27\/predictabe-buffetts\/","title":{"rendered":"Predictabe is Buffett&#8217;s favorite type of business to invest in"},"content":{"rendered":"\n<p>In his <a href=\"https:\/\/berkshirehathaway.com\/letters\/1989.html\" target=\"_blank\" rel=\"noreferrer noopener\">1989 Berkshire shareholder letter<\/a>, Buffett revealed predictabe business his favorite types of businesses to invest in.<\/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\/2023\/04\/27\/predictabe-buffetts\/#Predictabe_is_important_for_businesses\" >Predictabe is important for businesses<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/04\/27\/predictabe-buffetts\/#Sustainability_and_long-term_competitiveness\" >Sustainability and long-term competitiveness<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/04\/27\/predictabe-buffetts\/#In_line_with_his_acquisition_criteria\" >In line with his acquisition criteria<\/a><\/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\/2023\/04\/27\/predictabe-buffetts\/#Related_content_in_my_book\" >Related content in my book<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/04\/27\/predictabe-buffetts\/#Related_articles\" >Related articles<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Predictabe_is_important_for_businesses\"><\/span>Predictabe is important for businesses<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><em>Gillette&#8217;s business is very much the kind we like. Charlie and I think we understand the company&#8217;s economics and therefore believe we can make a reasonably intelligent guess about its future. (If you haven&#8217;t tried Gillette&#8217;s new Sensor razor, go right out and get one.) However, we have no ability to forecast the economics of the investment banking business (in which we have a position through our 1987 purchase of Salomon convertible preferred), the airline industry, or the paper industry. <\/em><\/p>\n\n\n\n<p><em>This does not mean that we predict a negative future for these industries: we&#8217;re agnostics, not atheists. Our lack of strong convictions about these businesses, however, means that we must structure our investments in them differently from what we do when we invest in a business appearing to have splendid economic characteristics.<\/em><\/p>\n\n\n\n<p><em>In one major respect, however, these purchases are not different: We only want to link up with people whom we like, admire, and trust.<\/em><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Sustainability_and_long-term_competitiveness\"><\/span>Sustainability and long-term competitiveness<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In <a href=\"https:\/\/berkshirehathaway.com\/letters\/1991.html\" target=\"_blank\" rel=\"noreferrer noopener\">Berkshire&#8217;s shareholder letter in 1991<\/a>, Buffett further used the following text to describe the investment goals he continued to seek, among which &#8220;sustainability&#8221; and &#8220;long-term competitiveness&#8221; were the key points he pointed out.<\/p>\n\n\n\n<p><em>We continually search for large businesses with understandable, enduring and mouth-watering economics that are run by able and shareholder-oriented managements. This focus doesn&#8217;t guarantee results: We both have to buy at a sensible price and get business performance from our companies that validates our assessment. But this investment approach &#8211; searching for the superstars &#8211; offers us our only chance for real success. Charlie and I are simply not smart enough, considering the large sums we work with, to get great results by adroitly buying and selling portions of far-from-great businesses. Nor do we think many others can achieve long-term investment success by flitting from flower to flower. Indeed, we believe that according the name &#8220;investors&#8221; to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a romantic.<\/em><\/p>\n\n\n\n<p><em>If my universe of business possibilities was limited, say, to private companies in Omaha, I would, first, try to assess the long-term economic characteristics of each business; second, assess the quality of the people in charge of running it; and, third, try to buy into a few of the best operations at a sensible price. I certainly would not wish to own an equal part of every business in town. Why, then, should Berkshire take a different tack when dealing with the larger universe of public companies? And since finding great businesses and outstanding managers is so difficult, why should we discard proven products? (I was tempted to say &#8220;the real thing.&#8221;) Our motto is: &#8220;If at first you do succeed, quit trying.&#8221;<\/em><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"In_line_with_his_acquisition_criteria\"><\/span>In line with his acquisition criteria<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In my blog post of &#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/04\/09\/buffetts-acquisition-criteria\/\">Buffett&#8217;s Acquisition Criteria<\/a>&#8220;, I mentioned that Buffett announced Berkshire&#8217;s M&amp;A criteria every year for many consecutive years starting from <a href=\"https:\/\/berkshirehathaway.com\/letters\/1982.html\" target=\"_blank\" rel=\"noreferrer noopener\">Buffett&#8217;s 1982 shareholder letter<\/a>. (2) Sustained and stable profits (we are not interested in companies with prospects or turning points), which refers to the predictability of the future of the company.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Related_content_in_my_book\"><\/span>Related content in my book<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In my 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;:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>In subsection 2-1, page 79: Whether the profit of the enterprise is sustainable.<\/li>\n<\/ul>\n\n\n\n<p>In my book &#8220;<a href=\"https:\/\/www.books.com.tw\/products\/0010935641?sloc=main\" target=\"_blank\" rel=\"noreferrer noopener\">The Rules of 10 Baggers<\/a>&#8220;:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Section 1-2, pages 29-37: The key to getting rich in the stock market lies in &#8220;time&#8221; and &#8220;sustainability&#8221;<\/li>\n\n\n\n<li>In subsections 2-3, pages 94-97: Most of the good performances of 10 times stocks are &#8220;sustainable&#8221;<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"183\" height=\"122\" src=\"https:\/\/www.granitefirm.com\/blog\/us\/wp-content\/uploads\/sites\/2\/2023\/02\/predictable-1600x1200-1.jpg\" alt=\"Predictabe \" class=\"wp-image-17844\"\/><figcaption class=\"wp-element-caption\">credit: dreamstime.com<\/figcaption><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"block-9d402b81-75c9-41fa-9a2d-6be1252e074e\"><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\/2023\/04\/05\/should-not-trust-forecasts\/\">Investors should not trust forecasts<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/04\/09\/buffetts-acquisition-criteria\/\">Buffett&#8217;s Acquisition Criteria<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/04\/27\/predictabe-buffetts\/\">Predictabe is Buffett&#8217;s favorite type of business to invest in<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/04\/21\/high-profit-companies\/\">How does Buffett select high-profit companies?<\/a>&#8220;<\/li>\n\n\n\n<li>&#8220;<a href=\"https:\/\/www.granitefirm.com\/blog\/us\/2023\/03\/20\/long-term-investment\/\">How Buffett Structures His Long-Term Investment Portfolio<\/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>In his 1989 Berkshire shareholder letter, Buffett revealed predictabe business his favorite types of businesses to invest in.<\/p>\n","protected":false},"author":1,"featured_media":17844,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[207,88,11],"tags":[],"class_list":["post-17843","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-main-business","category-acquisition","category-buffett"],"_links":{"self":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/17843","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=17843"}],"version-history":[{"count":17,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/17843\/revisions"}],"predecessor-version":[{"id":19706,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/posts\/17843\/revisions\/19706"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media\/17844"}],"wp:attachment":[{"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/media?parent=17843"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/categories?post=17843"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.granitefirm.com\/blog\/us\/wp-json\/wp\/v2\/tags?post=17843"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}