Principles of Investing - A lesson from BuffetYeah....you can take Buffet or leave him.
One of his basic rules is one which I have followed for most my of my investing life and that is to buy companies that are well managed and in an industry with moat around it.
By a moat, Buffet means that that it is very difficult for others to come up with an alternate product to seize market share or it is very difficult to get into the business without massive investment or a new technology.
This approach to investing has worked out very well for me over the decades primarily because it is a relatively easy thing to figure out. In the past it was one of the reasons I didn't get wiped out in the DotCom mania about 25 years ago.
So right now, I look at the oil industry and I see that the moat that has existed for over a hundred years has been breached in many ways by the "invaders" and so the simple thing to do is put my money elsewhere were there is a strong moat and with it growth prospects.
The oil moat has not been breached just by the movement to EVs. It also hapening in the petrochemical business as well. When the moat has been breached, the siege is on and yes it could take many years for the invaders to scale the walls and take the city but just like the inhabitants of the city, it is not going to be a great place to live with your investment dollars.
So let's talk dollars and sense.
The other day I gave the example of WM (again just using this company as example to make a point) and there are others in this business such as GFL and a number of European companies who with a modest investment over the next few years plan to double their FCF from the contribution of RNG production.
So as an investors would you rather hold stock in a company that is investing a billion dollars to double its FCF or a company that is spending a billion dollars just to maintain its current level of production like SU is doing at Fort Hills?
I made my money over the years looking at the facts, trying to see where the world is going, being open to change, listening carefully to others, and being extremely pragmatic as to where I put my money. Part of being pragmatic is the ability to take as much emotion out investing decisions as possible and certainly not being blinded by my love for a particular company.