[Someone1234]

The video in the article explains it pretty well. In essence he over-valued IBM and then ignored their decline for years, even while the company's core business continued to dry up. He finally just exited, taking huge losses in the process.

The problem with value investing is that it works great for traditional companies with normal products, but many of the fundamental analysis models fall apart with "tech" companies who's largest asset may be the brand itself.

For example Uber, they own few vehicles, have few employees, and no exclusivity. How do you run a fundamentals analysis on that? A lot of traditional models would tell you that company is worth near nothing.

[andr3w321]

I think you're confusing value investing with looking at a simple Price/Book ratio. Value investing is much more than that. One method of fundamental analysis involves making a prediction about ~10 years earnings/cash flows and comparing that to the 10 year risk free rate (usually the US 10 year treasury).

The fundamental analysis models don't fall apart with tech companies, it's just much harder to project revenues for a new, volatile, growing business than an old mostly stagnant or slow growing company.

[tim333]

Probably not huge losses. The author here estimates he was up 5%. The shares fell but paid dividends. https://www.gurufocus.com/news/651725/how-much-did-warren-bu...

[dmoy]

A 5% gain including dividends from 2011-2017 is a pretty bad showing. The market literally doubled on average in that timeframe.

[gowld]

BRK.A has more than doubled in that time frame, so as an overall portfolio strategy, they are doing well.

[megablast]

That doesn't mean they haven't made bad plays, and we can't talk about one of them. This was one. Lets not pretend it wasn't.

[valuearb]

If IBM is his biggest mistake, it’s a other testament to his skill.

[tim333]

He did worse with Tesco https://www.theguardian.com/business/2015/mar/01/warren-buff...

[stcredzero]

many of the fundamental analysis models fall apart with "tech" companies who's largest asset may be the brand itself

"Largest asset may be the brand itself," isn't that the definition of a reputation bubble? Sounds like a bubble to me, just a very long term one. There are some who say that the Bay Area/SV startup scene is a combination of real innovation and a bubble caused by ready availability of investment capital, which in turn is the result of governments injecting huge amounts of liquidity into the economy to kick the can down the road on the natural cycles of economic recession.

[valuearb]

Some of Buffett’s greatest investments have had much if not most of their value tied up in their brand, Coke, See’s Candies, American Express, etc.

Pretty clearly Buffett understands brand values.

[xapata]

> no exclusivity

They have about the same exclusivity that Facebook does, or any social network. It ain't easy to create a two-sided marketplace.

[matte_black]

Agreed, if Warren Buffet was just starting out today I doubt he would go for a pure value investing strategy.

[fwdpropaganda]

He wouldn't go for "pure value investing" even when he started. He started first with all sorts of arbitrage plays, and later on he put together a partnership where he used his investor's capital to acquire a controling stake in companies and then sell them off (what nowadays is called an activist investor, like Bill Ackman).

The folksy pure value investor that we know today didn't appear until much later, in the mid 1970s. To be fair though, this is what made him the most money.

[valuearb]

He wouldn’t change a thing. He hasn’t changed his overall strategy an iota since buying Sees Candy in the early seventies.

[fwdpropaganda]

> For example Uber, they own few vehicles, have few employees, and no exclusivity. How do you run a fundamentals analysis on that? A lot of traditional models would tell you that company is worth near nothing.

Don't forget almost no barrier to entry. It's relatively easy to go from nothing to be a local player dispatching cars in a small neighborhood which your friends drive.