Professor Glen Arnold

Investor lessons from Buffett's USAir mistake

May 27 2020 @ 06:52
In the last few newsletters we’ve lookedat the USAir case study to try to discern general lessons for less experienced investors than Warren Buffett. So what can we take away? If the industry economics are appalling, then walk away. Despite the excellent yield on the preferred stock Buffett came close to losing the entire investment because […]

The turnaround of USAir, then its death

May 26 2020 @ 06:16
Having presided over USAir loses cumulating to $2.4bn in 5 years Seth Schofield led the company back to profits in 1995.  But, unfortunately, he had still not gained enough concessions from the intransigent unions to give any surety of future profits.  The Washington Post commented that ironically the first sight of a profit became a problem because […]

USAir goes down and down for Buffett

May 25 2020 @ 05:26
When USAir’s Ed Colodny retired in Summer 1992 – three year after Buffett had bought preferred shares for Berkshire Hathaway –  his chosen successor, Seth Schofield, became Chairman as well as CEO. Schofield had come through the ranks, starting at 18 as a ramp agent: loading bags, selling tickets and boarding aircraft. He was a popular […]

What is value? Warren Buffett's thoughts

May 22 2020 @ 06:42
When judging the value of a share, a bond or a business Buffett encourages us to go back to basics as set out in John Burr Williams’ book The Theory of Investment Value (1938) and to see value being determined by estimated future cash inflows and outflows, with each forecast net cash flow for a period being […]

An investment that went wrong for Warren Buffett

May 21 2020 @ 06:04
In 1989 Warren Buffett’s Berkshire Hathaway bought $358m of preferred stock in USAir. It took only months for the airline’s managers indicate that losses were going to be made in both 1989 and 1990.  That news sent the common stock to around $30, far below the $60 required to make it worthwhile for Berkshire to convert […]

Warren Buffett's purchase of stock in USAir

May 20 2020 @ 06:29
Carl Icahn, an activist investor, had gained control of TWA in 1985 and immediately started calling Colodny to push for joining TWA and USAir, “He used to get on the phone and we’d go on for 30 or 40 minutes at a time. He would say we pay employees too much…and if we merged with […]

Caution required if you’re going back into the markets

May 19 2020 @ 06:11
If you were pondering whether we are now out of the woods and it’s a good time to go back into the stock market in a big way you might want to first consider the recent words of some key people. Paul Romer, Nobel Prize winner in Economics Paul Romer suggests that the best strategy […]

Warren Buffett's first airline purchase - a case study of error

May 18 2020 @ 06:46
Warren Buffett bought $358m of preferred shares in USAir in 1989. At one point he wrote down this investment by 75% and spoke of his bitter regret at having placed Berkshire’s money in an industry with such poor economics.  He was smarting so much that two years into the investment he said, “Despite the huge […]

Warren Buffett’s sale of airline shares

May 15 2020 @ 05:38
Following Warren Buffett’s announcement that he had sold all the shares in the four American airlines owned by Berkshire Hathaway there was a very negative market reaction, with their prices falling by yet another 10% or so on Monday 4th May. He explained that the economics of the airline industry had changed so much for the […]

Buffett tells us to have the right mindset when holding shares

May 14 2020 @ 05:53
Warren Buffett, speaking a few days ago, advised us to have a far horizon in mind when holding shares and to make sure we had the psychological resilience to be an investor. Buy for the long term “You shouldn’t buy stocks unless you expect to hold them for a very extended period and you were […]
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