Here’s a great recent interview with Warren Buffett speaking to Becky Quick at CNBC. During the interview Buffett, while speaking about Apple, provides some great insights into why investors should not buy stocks in companies that have to do everything right, saying:
Q1 hedge fund letters, conference, scoops etc
Apple, I’d love to see them succeed. That’s a company who can afford a mistake or two. You don’t want to buy stock in the company that has to do everything right.
In the mining business, any mine being dug should be able to stand a certain amount of bad luck because you run into different things as you get 5,000 feet down.
There’s some businesses that are quite predictable. Berkshire’s made lots of mistakes over the years and when I say Berkshire I mean me!
We started with the textile mill, and we had two other companies that fed into Berkshire – Diversified Retailing and Blue Chip Stamps. One that was trading stamps that went to zero and we started Diversified Retailing with the department store in Baltimore which eventually disappeared.
So you know you’re gonna make mistakes. You don’t want to make them with too big a portion of your capital and you want to recognize them when you do it. You want to basically hang on to your winners. It may just be the fact that I’m an 88 year old male so I don’t look back and think about all my mistakes all the time, It would take too long anyway. So Apple should do some things that don’t work.
Article by The Acquirer’s Multiple
