Moneycontrol

Budget 2021

Associate Partners:

  • SMC
  • Samsung
  • Volvo

Moneycontrol

Budget 2021

Associate Partners:

  • SMCSamsungVolvo

'There will not be another Warren Buffet for at least another 50 years'

Revolutionizing the concept of value investing in a truly sustainable manner and unflinching track record of wealth creation at a different level and scale has been a hallmark of ‘The Oracle of Omaha’!

February 25, 2020 / 10:45 AM IST

Lav Chaturvedi

We all know what Warren Buffet and Charlie Munger have created over the last 55 years or so is truly commendable.

Revolutionizing the concept of value investing in a truly sustainable manner and unflinching track record of wealth creation at a different level and scale has been a hallmark of ‘The Oracle of Omaha’!

However, 3 factors that I believe are key to making their retirement inevitable:

Warren and Charlie’s ages

Close

Difficulty in sustainably outperforming the market

Lastly, as they say, governance is above all!

Berkshire is a large organization, which I am sure will be taken forward by whoever is chosen to lead, but there will not be another Warren Buffet for at least another 50 years!

Key Learnings:

Buffett follows the Benjamin Graham school of value investing which is to look for securities with prices that are unjustifiably low, based on their intrinsic worth.

In his latest speech to shareholders he reiterated that they constantly seek to buy new businesses that meet three criteria:

First, they must earn good returns on the net tangible capital required in operation.

Second, they must be run by able and honest managers.

Finally, they must be available at a sensible price.

Investment is about consistently following basics, and this is one thing I believe Warren and Charlie has done exceedingly well for over 50 years.

Making the exit plan:

Warren Buffett outlines five factors to suggest that Berkshire is ready for their 100% exit.

First, Berkshire’s assets are deployed in an extraordinary variety of wholly or partly-owned businesses that, averaged out, earn attractive returns on the capital they use.

Second, Berkshire’s positioning of its “controlled” businesses within a single entity endows it with some important and enduring economic advantages.

Third, Berkshire’s financial affairs will unfailingly be managed in a manner allowing the company to withstand external shocks of an extreme nature.

Fourth, we possess skilled and devoted top managers for whom running Berkshire is far more than simply having a high-paying and/or prestigious job.

Finally, Berkshire’s directors – your guardians – are constantly focused on both the welfare of owners and the nurturing of a culture that is rare among giant corporations.

My Thoughts:

I believe Mr. Buffet has very beautifully summarized the recipe to success for any existing or potential entrepreneur and I could relate to the same.

According to him, in addition to individual passion and optimism, the importance of risk management, simple structure, financial discipline, quality of the team and robust governance is what it takes to build an institute that makes a meaningful contribution to all its stakeholders, which is what every entrepreneur dream about!

So long story short, he follows ‘basics’ and keeps things simple in anything he does whether it’s about making investment decisions or preparing his organization for their departures, an act I would say only genius could do.

(The author is ED and CEO, Reliance Securities)

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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