Patience is still a virtue. I was thinking about Warren Buffett today when Kraft/Heinz (KHC) released their third quarter earnings. I am of course a huge follower/fan of Warren since my earliest introduction to value investing almost thirty years ago. As Berkshire Hathaway has grown into a truly massive conglomerate it has been of course a lot harder to make individual investments other than during financial meltdowns. As a result Berkshire now tends to buy large to mega-cap companies outright or in conjunction with partners. Where am I going with this, well I think that it provides a valuable lesson about investing in general.
Warren has admitted he “paid too much” for his stake back in 2013 and there are a lot of reasons why. These iconic American brands have been his preferred companies for decades now but tastes have changed, at least in the US. However my point is that as an investor and especially a value investor you have to give an investment time to work. There is a reason you got to buy a piece of a company at a discount, something about that company was broken and it takes time to fix a company, especially a massive one. Will this be the case with KHC, who knows? They have a fundamental problem of selling processed foods in a world that wants more natural/organic products (at least in US/Europe). However, in developing markets big American brands are still aspirational items for a lot of consumers.
If you want to trade stocks it is a fundamentally different approach than investing and in some ways requires a different set of muscles, it’s also a full time job. Unless you have the time to devote to trading it makes a lot more sense to develop an investment plan and stick to it, outsize returns are made over the long term. If you’re investing based on quarter to quarter earnings, you’re doing it wrong.
-David
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