Viewing the Week Through Buffett's Glasses

As Real Money Pro's own Doug Kass heads to Omaha to chat with legendary investor Warren Buffett, I'm thinking about what Uncle Warren might say about several events this week. Although I'm not able to dial him up directly -- I'm no Becky Quick -- here's how some recent events line up with certain maxims that Buffett has shared over the years. Fact: Over the last few days, Berkshire Hathaway (BRK.A) sold 1.75 million shares of Moody's (MCO), of which it had been the largest shareholder. Moody's shares were trading at a six-year high, and prices have ranged from a low of $57.52 to a high of $61.19 so far this week. Buffett maxim: You simply want to acquire, at a sensible price, a business with excellent economics and able, honest management. Thereafter, you need only monitor whether these qualities are being preserved. Fact: Thorsten Heins, the CEO of BlackBerry (BBRY) has been making the rounds this week, making some interesting claims and prognostications for both BlackBerry and the larger industry. After what appears to be a strong launch of the company's latest BlackBerry model, the Q10, and given the install base, Heins said he expects several tens of millions of units to be sold. While Heins is enthusiastic about the company's prospects, the Department of Defense is set to grant separate security approvals for Samsung's Galaxy smartphones, which are Google (GOOG) Android powered, and Apple (AAPL) iPads and iPhones. That's the latest in a wave of rising competition and declining average selling prices across the industry -- not a good combination for BlackBerry or for a number of other smartphone manufacturers. Buffett maxim: If you don't feel comfortable owning something for 10 years, then don't own it for 10 minutes. Fact: Over the last few years, the stock market's reaction to missed earnings has gone from being down a few percentage points to far wider swings of down 10% to 20%. Buffett maxim: Only when you combine sound intellect with emotional discipline do you get rational behavior. Fact: Despite favorable long-term outlooks for their businesses, a number of companies -- ADT (ADT), Nuance Communications (NUAN), MasterCard (MA), and others -- saw their stock prices take it in on the chin. Buffett maxim: Long ago, Ben Graham taught me that 'Price is what you pay; value is what you get.' Whether were talking about socks or stocks, I like buying quality merchandise when it is marked down. Also, Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it. Fact: Recent economic data both in and outside the U.S. point to another spring swoon. Even though gas prices at the pump have ameliorated, concern is rising over the consumer's ability to spend further, given weak disposable income and savings rate figures over the last several months. The employment picture also weakened after a weaker-than-expected April ADP report, which also revised down the number of jobs created in March. Buffett maxim: The stock market is a no-called-strike game. You don't have to swing at everything -- you can wait for your pitch. Fact: Heading into this trading week, figures from FactSet Research pointed out that 73% of companies reported earnings above the mean estimate, and only 44% reported revenue above the mean estimate. Buffett maxim: You're neither right nor wrong because other people agree with you. You're right because your facts are right and your reasoning is right -- that's the only thing that makes you right. And if your facts and reasoning are right, you don't have to worry about anybody else. Fact: The Internet has enabled tremendous access to information -- company reports and presentations, Securities and Exchange Commission filings, trade and industry group studies, surveys and more. A potential pitfall for the average investor is analysis paralysis -- so much information that the investor is not sure what to do. Buffett maxim: To invest successfully, you need not understand beta, efficient markets, modern portfolio theory, option pricing or emerging markets. You may, in fact, be better off knowing nothing of these. In our view, though, investment students need only two well-taught courses -- How to Value a Business, and How to Think About Market Prices.

Viewing the Week Through Buffett's Glasses

Here's how some current events and attitudes line up with Buffett's philosophy.

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