Warren Buffett is now offering stock tips:
OMAHA, Neb. (Reuters) – Warren Buffett, the billionaire investor, tipped two stocks he has been buying recently, and indicated that he would be interested in buying firms overseas if the chance came up. Buffett praised rating firm Moody’s Corp. and tax preparer H&R Block at a media conference in Omaha, Nebraska, on Sunday, the day after the annual meeting of his insurance and investment firm Berkshire Hathaway Inc.. They are both very good franchises, said Buffett, who bought sizable minority stakes in both firms over the past year or so. They require little or no capital and earn good returns on capital employed. He added that both had good competitive advantages and little threat to their business, meeting some of the legendary investors’ key criteria in buying stocks or companies. The stock recommendation is a rarity for Buffett, as he is currently pessimistic about good investing opportunities in the stock market.
Questions for Buffett:
- How much of Moody’s and H&R Block do you buy?
- Do you hold it until death?
- When would you ever sell it?
Our point? Tips are useless. Where is the money management? There is none. Buffett’s tip is no different than any other talking head at CNBC.
Confronting reality — a prerequisite for trend following — requires you to know yourself. You must know what you really stand for.
Q. I have heard that trend following results in many small losing trades and fewer big winning trades. The process is therefore very taxing psychologically. Is this true?
A. How is trend following more taxing psychologically than being in the middle of a buy and hold strategy (which is essentially no plan) and down 70%+ (like the Nasdaq)? Trend following gives one a plan and an understanding where profits come from. It’s not just built on ‘hope’, ‘fear’ and ‘greed’ or as we like the to say the three words that define investing for most market losers.