A Portfolio Warren Buffett Would Love - Interview with Bruce Berkowitz

Bruce Berkowitz recently spoke with U.S. News about why diversification is overrated, how volatility is opportunity, and whether Sears Holdings can be the next Berkshire Hathaway. Excerpts:

How does this investment approach differ from others?

In business school, you're taught that diversification is very important. But really, when you think about it, diversification has to do more with ignorance. If you are highly confident in your top five positions, why should you put more in your 10th position if you could put more in your best idea? Secondly, business schools teach that risk is volatility. We think volatility is opportunity. For example, if you follow the business school formula, when something goes down 50 percent in price, it's considered riskier. Personally, I would say it's considered safer—you're paying half.
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Direct Link - A Portfolio Warren Buffett Would Love.

Mark Sellers: Take advantage when good companies come to market

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A future IPO that I’m excited about is Visa, which plans to go public this year and is certainly a wide-moat company (even more so than Mastercard) and has oodles of operating leverage. It remains to be seen whether analysts will underestimate its potential or not. I will be sure to comment on this in future columns, when the IPO date is announced.

Direct Link - Take advantage when good companies come to market.

Good Teachers, Great Students - Interview With David Winters

Barron's: The markets are off to a lousy start in 2008. The Standard & Poor's 500 is down about 8%, and bond spreads have widened considerably. Is this any way to greet a new year?

Winters: We view this as a gigantic after-Christmas sale. There has been a lot of indiscriminate selling at any price. Certainly, some securities and companies have been adversely affected by what has been going on, and these are securities to avoid. But almost everything has been tarred with the same brush. We continue to be very careful about what we are buying. We want to buy companies that generate a lot of free cash flow that's growing; have even more attractive prices these days, and are run by people who are motivated to do the right things for all shareholders. So we view this recent period in a very constructive manner. To have markets just go up all the time doesn't help a long-term investor.
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Direct Link - Good Teachers, Great Students.

Whitney Tilson on WealthTrack, 2-22-08

What are some of the most expensive mistakes that investors can make in the current market? On hand to dispense advice to WealthTrack viewers will be Barron's Online Editor Randall Forsyth, value investor Whitney Tilson and Consumer Reports Personal Finance Columnist Amanda Walker.

Here is video link and transcript. (Only available for 2 weeks)
Or you can download the video (MP4 Format) here (Right Click and Save as..).

David Winters: It is a great time to buy cheap, 1-21-2008

David Winters appears on Bloomberg TV. He thinks it is great time to buy. David Winters also discussed tabacco stocks.

Video Link - David Winters: It is a great time to buy cheap.

Notes from Buffett Meeting, 2-15-2008

Students from Emory's Goizueta Business School and McCombs School of Business at UT Austin were invited to come visit Mr. Buffett for a Q&A session. These notes were reproduced to the best of my ability as I heard and as I could recall them from a collection of mine and other students' notes. There is no guarantee that this was exactly what was said, but the intent was to preserve the spirit of the message. Enjoy.

Emory: With the popularity of "Fortune's Formula" and the Kelly Criterion, there seems to be a lot of debate in the value community regarding diversification vs. concentration. I know where you side in that discussion, but was curious if you could tell us more about your process for position sizing or averaging down.

Buffett: I have 2 views on diversification. If you are a professional and have confidence, then I would advocate lots of concentration. For everyone else, if it’s not your game, participate in total diversification. The economy will do fine over time. Make sure you don’t buy at the wrong price or the wrong time. That’s what most people should do, buy a cheap index fund and slowly dollar cost average into it. If you try to be just a little bit smart, spending an hour a week investing, you’re liable to be really dumb.
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Direct Link - Notes from Buffett Meeting, 2-15-2008.

Baupost 2007 year end letter excerpt

Financial Market Cycles: When Virtuous Circles Become Vicious.

The capital markets, the economy, and Wall Street firms all experience cycles. For capital markets, the cycles consist of bull and bear markets; for the economy, boom and bust. For Wall Street firms, the cycles are of financial innovation, risk-taking, limit-pushing, and hefty compensation, followed by retrenchment, revulsion, write-offs, and layoffs.
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Direct Link - Baupost 2007 year end letter excerpt. (PDF)

Whitney Tilson: Investors will miss out if they confuse uncertainty with risk

Whitney Tilson's latest article on FT's Inside Curve column.

Dealing with uncertainty is always a key challenge for investors. But dealing with uncertainty doesn’t mean avoiding it – on the contrary, it is often fuzziness about a company’s future that creates the type of opportunity bargain-hunting investors cherish.
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Direct Link - Investors will miss out if they confuse uncertainty with risk.

Seth Klarman's Talk at MIT

Baupost Group’s Seth Klarman is not only one of the most able practitioners of value investing, he is also one of the discipline’s most articulate advocates - as evidenced by this recent speech at M.I.T.

Related Links :

• About Leverage, Volatility and Finding Sanity When Others Have Lost Their Heads
• Seth Klarman's Talk at MIT (PDF)
  

Tom Russo on WealthTrack, 2-15-08

As losses continue to mount at banks and other financial institutions in the U.S. and abroad, what is the outlook for the world's financial markets? What, if anything should individual investors be doing in response? Here to answer those questions and more will be global investor Tom Russo, Annaly Capital Management's Michael Farrell and veteran Wall Streeter Muriel Siebert, former Superintendent of Banking for New York State, now head of the discount brokerage firm that bears her name.

Here is video link and transcript. (Only available for 2 weeks)
Or you can download the video (MP4 Format) here (Right Click and Save as..).

Wit and wisdom of Omaha's sage - Feb.07/2008

After an interview with the Financial Post, Warren Buffett, chairman of Berkshire Hathaway Inc., yesterday answered questions from some of Bay Street's top investor relations professionals. He shared more on his views on the markets, politics and the economy.

Q What are your views on the credit crunch?

A Credit has been repriced, but it has not become unavailable. There is repricing of risk and an unavailability of what I might call "dumb money," of which there was plenty around a year ago.

We first noted it big in the mortgage field. You had a situation a couple of years ago where virtually every American believed that house prices would do nothing but go up. If you've got every American believing that about any asset class, they're going to get more and more enthused about it, and borrow more and more money against it. And the lenders believed it, as well. And then you had Wall Street repackaging mortgages into unfathomable instruments that people bought to get a little bit extra yield, and now we are finding out what they own.

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Related Links :

• Wit and wisdom of Omaha's sage
• Buffett “huge bull on the U.S. economy”
  

Warren Buffett to CNBC - 02/12/2008

In a live telephone call to Squawk Box, Buffett offered to reinsure $800 billion in municipal bonds now insured by Ambac, MBIA and FGIC, effectively giving them a AAA credit rating.

Related Links :

• Buffett's Big Muni Bond Offer: CNBC Interview Transcript (Part 1)
• Buffett Sees Stocks In "General Range of Fair Value": CNBC Interview Transcript (Part 2)
• Buffett on Bond Insurers
• Billionaire Warren Buffett, Berkshire Hathaway chairman/CEO has some plans to resurrect this industry.
  
• Buffett on Bond Insurers 2