Recently Warren Buffett increased his stake in SiriusXM (SIRI) to over 32% of all available stock. However, with the company losing subscribers – where revenue and earnings in decline – why would the Oracle of Omaha increase his ownership? Two reasons: (a) first its return on invested capital and free cash flow; and (b) the value offered. This post explains both the quality and value arguments for Buffett choosing to increase his exposure to this unloved stock…
Warren Buffett
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Simplifying Quality & Value
Charlie Munger once joked “all I want to know is where I’m going to die, so I’ll never go there.” Jokes aside – it’s the same approach you should apply with investing. And it’s not difficult to do. The math is very simple — addition, subtraction, division and multiplication. If you have access to a calculator – you’re all set. The challenge is mastering your emotions (and any self-defeating behaviors). A calculator (or AI) can’t help you with that. This game is more EQ than it is IQ. Think of it as a test of your character versus your intellect. For e.g. – many highly intelligent people get investing wrong (e.g., due to emotions such as greed, fear or some inherent bias). This post talks about how we can simplify our approach to avoid taking excessive risks
Invert Your (Investing) Mindset
Charlie Munger once said “it is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent”. There’s a lot of wisdom to be gained in that quote. Now getting things wrong can be a good teacher if you’re willing to learn from the experience. However they can also be very expensive. With respect to investing – our primary goal should be to eliminate (or meaningfully reduce) the possibility of making large costly mistakes. A large mistake can reduce our investable capital – impacting our returns for years to come. So how do we try to make fewer mistakes? There are two ways….