Tag Archives: warren buffett’s thoughts

ABWA – acquisitions by walking around

eiffeltowerfreeIn his letter to Berkshire Hathaway shareholders (March 1, 1996) for Year 1995, Warren Buffett said: “A few years back, management consultants popularized a technique called “management by walking around” (MBWA). At Berkshire, we’ve instituted ABWA (acquisitions by walking around).”

What is this ABWA that Mr Buffett was talking about?

“In May 1994, a week or so after the Annual Meeting, I was crossing the street at 58th and Fifth Avenue in New York, when a woman called out my name. I listened as she told me she’d been to, and had enjoyed, the Annual Meeting. A few seconds later, a man who’d heard the woman stop me did so as well. He turned out to be Barnett Helzberg, Jr., who owned four shares of Berkshire and had also been at our meeting,” said Mr Buffett.

The interesting thing was not about the four Berkshire shares that Mr Helzberg owned. The interesting thing was that this chance meeting led to Berkshire Hathaway buying Helzberg’s Diamond Shops in 1995. That was one example of Mr Buffett’s ABWA: acquisitions by walking around.

Besides finding that “Helzberg’s was the kind of business that we wanted to own”, Mr Buffett also liked it for its good management. “Buying a retailer without good management is like buying the Eiffel Tower without an elevator,” he said.

Recommended reading:

(1) The Essays of Warren Buffett: Lessons for Corporate America, Third Edition

(2) Berkshire Hathaway Letters to Shareholders, 1965-2013

America’s best days lie ahead

statuelibertyThis line came from Berkshire Hathaway chairman Warren Buffett in his annual letter (26 February 2011) to shareholders for Year 2010.

To the prophets of doom, Warren Buffett has this to say: “The prophets of doom have overlooked the all-important factor that is certain: Human potential is far from exhausted, and the American system for unleashing that potential – a system that has worked wonders for over two centuries despite frequent interruptions for recessions and even a Civil War – remains alive and effective.”

In the FY2010 letter (26 February 2011), Warren Buffett said that last year – in the face of widespread pessimism about our economy – “we demonstrated our enthusiasm for capital investment at Berkshire by spending $6 billion on property and equipment.”

Here is a great excerpt from his letter:
“Money will always flow toward opportunity, and there is an abundance of that in America. Commentators today often talk of ‘great uncertainty.’ But think back, for example, to December 6, 1941, October 18, 1987 and September 10, 2001. No matter how serene today may be, tomorrow is always uncertain.
“Don’t let that reality spook you. Throughout my lifetime, politicians and pundits have constantly moaned about terrifying problems facing America. Yet our citizens now live an astonishing six times better than when I was born. The prophets of doom have overlooked the all-important factor that is certain: Human potential is far from exhausted, and the American system for unleashing that potential – a system that has worked wonders for over two centuries despite frequent interruptions for recessions and even a Civil War – remains alive and effective.
“We are not natively smarter than we were when our country was founded nor do we work harder. But look around you and see a world beyond the dreams of any colonial citizen. Now, as in 1776, 1861, 1932 and 1941, America’s best days lie ahead.”

Recommended reading:

(1) The Essays of Warren Buffett: Lessons for Corporate America, Third Edition

(2) Berkshire Hathaway Letters to Shareholders, 1965-2013

Warren Buffett’s thoughts on marketable securities

stockpriceboard“We ordinarily make no attempt to buy equities for anticipated favorable stock price behavior in the short term. In fact, if their business experience continues to satisfy us, we welcome lower market prices of stocks we own as an opportunity to acquire even more of a good thing at a better price,” Warren Buffett said this in his 1977 letter to Berkshire Hathaway shareholders.”

Mr Buffett said that Berkshire Hathaway’s experience has been that pro-rata portions of truly outstanding businesses sometimes sell in the securities markets at very large discounts from the prices they would command in negotiated transactions involving entire companies.

“Consequently,” Mr Buffett said, “bargains in business ownership, which simply are not available directly through corporate acquisition, can be obtained indirectly through stock ownership.”

“When prices are appropriate, we are willing to take very large positions in selected companies, not with any intention of taking control and
not foreseeing sell-out or merger, but with the expectation that excellent business results by corporations will translate over the long term into correspondingly excellent market value and dividend results for owners, minority as well as majority,” said Mr Buffett in the 1977 letter.

Recommended reading:
Berkshire Hathaway Letters to Shareholders, 1965-2013