Buffett turns 80, but says he plans to work past 100.
The world's greatest investor, Warren Buffett, has just turned 80. Over the years, he has provided Foolish readers with truckloads of wisdom and plain simple investing advice. His contribution to the investing landscape is invaluable.
The good news for Buffett followers and Buffett junkies like myself is that he plans to keep working until he's 100 years old.
"I plan to work past 100, but to do so I may have to learn to think outside the box," Buffett tells Deal Journal.
Five more years
Perhaps a little more realistically, Glenn Tongue of T2 Partners says Buffett "really has never seemed sharper, and he's on his game right now. We would be surprised if he's not in his current role in five years."
One thing is for sure. The investment decisions Buffett is making today are ones that will well and truly outlive him.
The $44 billion acquisition of US railroad Burlington Northern Santa Fe was the ultimate big elephant for Buffett, both fulfilling his childhood dream of owing his own railway, but also fulfilling his desire to deploy a very large sum of capital. When you are already worth $47 billion, a few million invested here or there isn't going to move the wealth dial.
The secret to Buffett's success
That deal, more than anything, epitomised Buffett's investing philosophy and his style.
Firstly, Burlington has an impregnable competitive advantage. New, competing railways, are simply not going to be built. Buffett's ability to assess a company's enduring competitive advantage is the most important, and perhaps the most under-rated, of Buffett's investment process.
Buffett is often characterised as a value investor, and with good reason, for he has told us over the years how important it is to have a margin of safety when making an investment.
Many people translate "margin of safety" into "dirt cheap", and trying to emulate the great man, sniff around shares that have been beaten down to ultra low valuations.
Yell Group (LSE: YELL) on a forward P/E of 2(!!) and Enterprise Inns (LSE: ETI) on a forward P/E of 3.5 might get some Buffett-wannabes excited. But Buffett himself would likely give such businesses a very wide berth, simply because he'd be turned off by their lack of competitive advantage, and by inference, their lack of future growth prospects. Their large debts would turn him off, too.
Raining gold
Only very rarely does Buffett get the opportunity to buy dirt cheap shares. He did it most recently in 2008 when global stock markets went into a major panic, investing $5 billion in Goldman Sachs and $3 billion in General Electric. "We've put a lot of money to work during the chaos of the last two years. When it's raining gold, reach for a bucket, not a thimble."
It's not quite raining gold today. Markets, while jittery, are not in full blown panic mode, as they were in late 2008 and early 2009. As such, Buffett is likely to bide his time and wait for more elephants to come to him.
Speaking of which, I was surprised to see Buffett named as a potential buyer of Royal Bank of Scotland's (LSE: RBS) Direct Line insurance business.
As reported in The Guardian, "the billionaire investor's Berkshire Hathaway group has reportedly expressed interest in Direct Line after RBS last week launched a beauty parade of investment bankers to handle any deal. RBS favours a flotation of the business but it is thought that heavy losses caused by car accident claims have increased the chances of a sale."
On the one hand, if "heavy losses" translates into a distressed sale, Buffett would likely be there with bells on. He likes nothing better than to pick up a great business temporarily going through hard times, at bargain basement price.
But on the other hand, Buffett positively eschews "beauty parades", as they involve competitive bidding. No matter how much he likes the Direct Line business, Buffett is highly unlikely to enter into a bidding war. As such, I'd suggest the chances of Buffett buying Direct Line are virtually zero. Still, in this day and age of instant news, it makes for a good headline.
Buffett loves growth
As we wish Warren Buffett a happy birthday, and wish for many more to come, it's worth focusing on how and why he's such a successful investor. Ultimately, it's his unique ability to assess a company's long-term competitive advantage. When he finds such a business, he's happy to pay a decent price, secure in the knowledge that in the years and decades ahead, the business will grow, and grow and grow.
Although he loves a bargain, Buffett's no value investor.
More on the economy and the markets:
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> Bruce Jackson has an interest in Berkshire Hathaway.
