Wealth Accumulated

By D J Thomas, a large-cap stock market value investor and financial writer

Fundamentals

Apple is NOT 35% of Berkshire’s portfolio

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Apple is not 35% of a Berkshire portfolio… Berkshire’s portfolio includes the railroad and the energy business Garanimals, you name it, See’s Candies — they’re all businesses

Warren Buffett

The mistake I sometimes make is not that I rely on sources like dataroma’s breakdown of Warren Buffett’s portfolio; the mistake is not placing that data into context.

Buffett owns a lot of Apple stock compared to the rest of his portfolio, but compared to the portfolio of the entire business of Berkshire, not so much.

To place the data into context, at the end of the last quarter, Berkshire had $997 billion in assets, $328 billion of which were in equities.

Even so, there’s no doubt, Buffett loves Apple.

But as with Greeks bearing gifts, beware of sources bearing data.

Fundamentals are about noticing that it is raining today

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I’m in a perpetual state of scholarship when it comes to financial markets and used to suffer from a little snobbery: I used to be naive enough to think that traders, as opposed to investors, couldn’t teach me anything about value investing or fundamentals.

That is until I started listening to Hedge Fund Market Wizards by Jack Schwager.

Here’s a quote from one of Jack’s interviewees Colm O’Shea, founder and Chief Investment Officer of COMAC Capital, a global macro hedge fund trader based out of London.

Fundamentals are not about forecasting the weather for tomorrow, but rather noticing that it is raining today. The great trades don’t require predictions. The Soros trade of going short the pound in 1992 was based on something that had already happened; an ongoing deep recession that made it inevitable that the UK would not maintain the high interest rates required by remaining in the ERM. Afterward eveyone said ‘that was incredibly obvious’. Most of the great trades are incredibly obvious.

Colm O’Shea

For me, that first line ‘fundamentals are not about forecasting the weather for tomorrow, but rather noticing that it is raining today‘ is extremely powerful because it focuses the mind on the now (common sense) rather than the later (speculation).

As necessary as it is to listen to the talking heads of the mainstream financial press in order to avoid what the market is doing, resisting the urge to get drawn into their incessant predictions can become tiresome.

Like the Dementors from the Prisoner of Azkaban, the majority of MSM financial jockeys are relentless soul-suckers:

Dementors are among the foulest creatures that walk this earth. They infest the darkest, filthiest places, they glory in decay and despair, they drain peace, hope, and happiness out of the air around them… Get too near a Dementor and every good feeling, every happy memory will be sucked out of you. If it can, the Dementor will feed on you long enough to reduce you to something like itself… soulless and evil. You will be left with nothing but the worst experiences of your life, and you will just be an empty shell that lost its soul

Remus Lupin

My disdain for them is self-evident.

So in order to combat their vampire tendencies, focus on the fundamentals just like O’Shea preaches, and replenish your mind body, and soul with a committed behavioural finance practice as an antidote for having to share the same digital space as these creatures of the night.