(ĐTCK-online) Warrent Buffet is the world coming to our shores and called him the most successful investors of all time. However, he himself always recognized that: most talented investors make mistakes. He wrote annual letters to the shareholders of the Company Bershire Hathaway and tell about the biggest investment mistake. There are many things we need to learn from decades of experience Buffett's investment. Here are three typical mistakes.
Stories with Conoco Phillips Company: Buy at the wrong price
In 2008, Buffett bought a large stake in Conoco Phillips (COP) for the purpose of speculation on energy prices in the future. Buffett said that many people would agree about the price of oil will rise in the long term. And so, COP would earn profit. However, this investment did not end as expected, because Buffett bought at too high a price. As a result, Berkshire several billion loss in this investment. Thus, a good company to do business does not mean a great investment if you buy in the stock price is not reasonable.
Lesson learned:
Investors are easily swept away by the excitement to meet increasing market status simultaneously. Now, we often buy stocks at a price that should not have bought. The investors to control their emotions more often an objective analysis. An independent investor mentality than the market can realize that the price of crude oil continued with very strong amplitude fluctuations and stocks of oil companies have long become a bubble about to burst .
Buffett comment:
When investing, optimism is our friend. But excitement is the enemy.
Stories with USAir Company: Confusion between the annual income growth with the success of the company
In 1989, Buffett bought preferred shares of USAir because the company's annual growth rate is very high. But this investment is quickly becoming a concern for Buffett when USAir was not enough profit to pay dividends to preferred shares. Fortunately, then Buffett liquidated stock lots at a profit. Although he is lucky, Buffett also realizes that profit from the deal because of the "Goddess of luck" and over-excited state of the market.Lesson learned:In 2007, Buffett has pointed out very clearly in his letter: Sometimes, if you look at revenue growth of a business, we can see that this company is doing very well. However, to maintain growth, the need to spend a huge amount of capital. In the case of the airline industry always needs new aircraft to expand revenue, the issue of the types of businesses require large capital is when companies _ large sales volume, it sank deeper into debt. It can only leave little for shareholders and easy to fall into bankruptcy if the business is reduced.Buffett comment:The investors were pouring money into a bottomless pit, attracted by growth, while they should have stay away from it.Stories with with Dexter Shoes Company: Investing in a business does not have a competitive advantage
In 1993, Buffett bought shares of a shoe company called Dexter Shoes. His investment in this shoe company quickly became a disaster, because long-term competitive advantage of the company quickly disappeared. "What I have to assess a company's competitive advantage has disappeared in the last few years," Buffett said, and said that this is the worst investment he ever made. It makes Berkshire Hathaway shareholders lost $ 3.5 billion.Lesson learned:Enterprises can earn high returns only when a special competitive advantage compared to other companies in the same business area. Wal-Mart sales with very cheap price. Honda created with excellent quality. When companies can provide these things better than the other companies, it also creates high rates of return. If not, the high profits attract competitors and the audience will quickly gain all the profits of the company.Buffett comment:"A truly great companies have long-term private secret protection for excellent profits brought from the capital."Conclusion:Although mistakes with money always brings a painful experience, but paying a little "fees" are not synonymous with the final loss. If we analyze the mistakes and learn from it, we can easily earn back the money spent on the next one. All investors, including Buffett, have to understand that mistakes are inevitable.
