The Buffettology Workbook

Chapter One: Short-Sightedness and the Bad News Phenomenon: The Gifts That Keep On Giving

Short-sightedness and the bad news phenomenon. What are these things and what do they have to do with Warren Buffett? The answer is everything.

If the vast majority of the stock market were not short-sighted, Warren Buffett would never have an opportunity to buy some of the world's greatest businesses at discount prices. He could never have bought 1.7 million shares of The Washington Post twenty-seven years ago for approximately $6.14 a share. The Washington Post now trades at approximately $500 a share, which makes his $10.2 million initial investment worth approximately $863.8 million today. That equates to a pretax annual compounding rate of return of 17.8%. Without the short-sightedness of the stock market, Warren could not have bought Coca-Cola for $5.22 a share twelve years ago. It now trades at approximately $50 a share, which equates to a pretax annual compounding rate of return of approximately 21%.

Warren discovered early on in his career that 95% of the participants i ... read full excerpt from: The Buffettology Workbook: Value Investing the Warren Buffett Way ebook