Warren Buffett Quotes #53
Just a very quick one today, and I thought I would actually try out one of the “aside” post options to see how it works.
Recently Market Index sent out their monthly (I think) email, and it contained a link to 10 quotes from the 53rd Berkshire Hathaway annual meeting. There were two I wanted to explore a little further:
On cryptocurrencies: “When you buy Bitcoin, you are just hoping that the next guy will pay more; it will not produce profit itself. That is not investing, that is a kind of game … Anytime you’re buying a non-productive asset, you are counting on somebody else to buy it at a higher price on a later date because that person thinks he would be able to sell it to someone else. Eventually, cryptocurrency will come to a bad ending. It has nothing to add value to it.” [Buffett]
The one area where I have seen cryptocurrencies (not just Bitcoin) fill a needed void is in the area of international and/or long distance anonymous money transfer. In that respect I almost view it like a special currency rather than an investment.
On avoiding formulas in valuation: “I do not use a formulaic approach to valuing a company or stock like future cash flow etc. If the gap between value and price do not look attractive, I go to something else.” [Munger]
I am happy for them not to use formulas, but how do you assess value without some form of formula. Perhaps I misunderstood the quote or there is some other valuation method I am missing (if so please tweet or comment with a link). The idea of paying a current price that is less for a company than a value is a fantastically simple idea (another of the quotes). The price is easy enough to see with listed companies, however the actual value needs to be assessed. Perhaps i am just posing an age-old question that everyone has a different answer for…