Hot Features
Premium
Trade like a pro: Leverage real-time discussions and market-moving ideas to outperform.
Warren Buffett set aside 15 minutes at the beginning of the Berkshire Hathaway meeting to convey the important difference between productive and non-productive assets.
He started by going back to when he was an 11-year-old boy. He opened up the edition of the New York Times for March 10th 1942 (he says he’s a little behind on his reading!).
The main headline two days before was “Japanese Smash Bandung lines…Java Radio silenced” on 9th March it was “Japanese invade New Guinea” and on March 10th “98,000 give up in Java”. Things looked really bad.
Warren had been watching City Services preferred stock fall from $84 the previous year down to $40 and on March 10th said to his dad that he would like to buy three shares (spending all he had). The next day his dad, a stock broker, bought three shares for him. This was a day when the Dow fell 2.28%.
Warren had bought at $38.25 and by the end of the day they were trading at $37. “That was really characteristic of my timing, which was to appear in future years!”
What happened next?
On the screens we then saw a chart of CS preferred from 1942 to 1946. They had fallen from the beginning of 1942 to 11th March 1942. Then they fell a bit more, by November they were around $30.
Warren sold in July 1942 at $40, a gain of $5.25 on his three shares.
He says that even in 1942 “everybody knew we were going to win the war.. the American system had been working well since 1776” By August 1946 the shares had risen to around $160.
Imagine you had put $10,000 into the S&P 500 (or its equivalent back then) in March 1942, or invested in a farm or apartment $10,000 and looked at the output of the asset to determine whether it was a good investment (not the market!).
The shares – “those pieces of American business” – would now be worth $51m. $10,000 to $51m – the audience of 40,000 gasped. Even in 1942 you could look at America and know that it was going to do well.
“And you wouldn’t have to do anything. You don’t…………………..
……………To read the rest of this article, and more like it, subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1
