Subject: Re: Dealraker made a point worth contemplating: "
Mr. Buffett is famous for not having visited or even having seen the operations of most businesses he has purchased. In the talk at the University of Florida in 1998, he was speaking about his (then recent) purchase of Gen Re and joked "I hope the business is there" to the crowd's laughter :-)

By that logic, should we stop listening to Mr. Buffett as well?




No, Buffett makes a very good point. Sometimes that site visit is what stops you from making a great investment. For instance, there are companies (I'm thinking of one in particular) that I would be quite unlikely to visit myself as a customer: as rationalwalk points out, it makes a lot more economic sense to buy at Walmart or Costco than at a dollar store, if you are like most of us and have a car, a big fridge and freezer, and no worries about spending a lot of money for a huge amount of stuff at cheap prices. But despite being pretty frumpy stores, financial statements will tell you that, for some mysterious reason, they have been pretty consistently profitable for decades, the filth and squalour and the low quality of the goods notwithstanding.

If you do want to visit the stores, then visit them when the share price is high, and visit them when the share price is low, and try to see if there's any difference. You'll probably conclude that that filth and squalour and low quality has been there for decades.

But the worst thing to do is to visit them just when the share price has swooned, and to argue yourself out of the investment just because you don't personally like the stores very much. Who would shop there, after all? The answer is, lots of people that have different standards and different constraints than you.

dtb