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Buffett-like returns still possible?

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brilliantmichael

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I read somewhere that Buffett, while working for Graham Partners, managed over his 5 year stint at the firm to grow his little grubstake of $9800 into $140,000 (or in today's currency about $80,000 into $1,000,000!), starting at around the age of 21.

This amounts to an annual compounded return of about 70% averaged out over 5 years.

It is generally conceded that Buffett used the 'cigar-butt' technique to achieve this. But it is still a mystery as to exactly which issues (historically) he managed to do this with.

My question is:
- Is this still possible in today's efficient market?
- Was it possible at all in the 1950's?
- Is the ASX volatile enough to garner these kind of returns? (For that matter, is the ASX more or less volatile than other bourses?)
 
That why there is only one Buffett, One Bill Gates, 1 Google Lary Page etc .. :)
These people exhibit quality that 99.99% of human doesnt and they happen to be in the right place @ the right time as well.

It's close to impossible to get 70% return a year over 5-10 years period unless
you live some where, where stock market double every year.
 
I think these returns can be achieved now days,
The market as a whole will never produce those returns, but individual stocks will and do make those returns possible.

however there are 2 problems in the way
1) the amount of time and energy required to research and find these individual company's is alot.

2) and the biggest problem is how many people have the courage of there own convictions to back there own research, with all off there own money time after time to achieve those results.

Which is why so few people have the required skills to find the company's and the guts to back themselves ( even when the markets says you are wrong ). Hence this will only ever be achieved by a minority of people.

PS I wish i had this talent ( sadly i don't, i must carry on the same as everyone else )
 
brilliantmichael said:
I read somewhere that Buffett, while working for Graham Partners, managed over his 5 year stint at the firm to grow his little grubstake of $9800 into $140,000 (or in today's currency about $80,000 into $1,000,000!), starting at around the age of 21.

This amounts to an annual compounded return of about 70% averaged out over 5 years.

It is generally conceded that Buffett used the 'cigar-butt' technique to achieve this. But it is still a mystery as to exactly which issues (historically) he managed to do this with.

My question is:
- Is this still possible in today's efficient market?
- Was it possible at all in the 1950's?
- Is the ASX volatile enough to garner these kind of returns? (For that matter, is the ASX more or less volatile than other bourses?)
Click to expand...


I think in the Spec market this is indeed achievable - look at PDN, if you bought that just 3-4 years ago, and held until now :eek:

But, spec stocks do involve luck, & risk; and that's only one stock - but, I believe this is still achievable.
 
Nyden said:
I think in the Spec market this is indeed achievable - look at PDN, if you bought that just 3-4 years ago, and held until now :eek:

But, spec stocks do involve luck, & risk; and that's only one stock - but, I believe this is still achievable.
Click to expand...

lol, Hasn't YT done it or gone close :eek::p:
 
Gunlom said:
I think these returns can be achieved now days,
The market as a whole will never produce those returns, but individual stocks will and do make those returns possible.

however there are 2 problems in the way
1) the amount of time and energy required to research and find these individual company's is alot.

2) and the biggest problem is how many people have the courage of there own convictions to back there own research, with all off there own money time after time to achieve those results.

Which is why so few people have the required skills to find the company's and the guts to back themselves ( even when the markets says you are wrong ). Hence this will only ever be achieved by a minority of people.

PS I wish i had this talent ( sadly i don't, i must carry on the same as everyone else )
Click to expand...

I agree - few people have the patience to do No.1 to the level of detail necessary. Once a candidate has been identified via No. 1 though, No. 2 is by far the most difficult thing to do - stand by your convictions and allocate significant quantities of capital against prevailing market psychology. This is also why doing No 1. impeccably, and also having quantitative selection criteria is essential.
 
brilliantmichael said:
- Is this still possible in today's efficient market?
Click to expand...

Where did you get the idea that today market is now efficient????

If it is, then all the traders in the world will now run out of business. :rolleyes:

It is possible in a trader's view. (there is someone in the future managed industry who has turned $40,000 to $400,000 in 24 months with respectable drawdown, at current rate, he will break $1,000,000 mark in another 10 months, assuming system continues to work heh)

However, if you are an investor who only look at fundamentals and pursue the buy and hold strategy (similar to Warren Buffet), it is still possible but would most likely be far far far more difficult to achieve without some sort of godly edge.
 
Temjin said:
Where did you get the idea that today market is now efficient????
Click to expand...

I, like Buffett and the more entrepreneurial traders, also believe the market can at times be very inefficient. What I meant is that the market on the whole may be much more efficient nowadays 'most of the time'. What I mean is that with technologies such as stock screeners, the internet as you and I use, and much more open disclosure, the market reacts to news much more swiftly than in the old days.

But I think the edge that Mr.B and other wizards (such as contrarian investors) have over the market is that they have a 'theoretical framework' that is based on a rather sturdy philosophy.

The billion dollar question is: which is the best philosophy? :2twocents
 
I don't think the market is much more efficient than it was in the past. Maybe a little more in the large cap end, but even then not necessarily.

The reason is that psychology is still the biggest driver behind investment decisions, both buying and selling. Most individuals do very little detailed research. The managers of funds have analysts that do detailed research but the actual allocation decision makers just work off the finished product, don't get their head around the fine details of each stock they select and optimism about particular stocks or sectors is thus still at play in their decision making process. Another thing is that sectors and stocks come into and out of favour and fund managers can't stray too far from what their peers are doing. So they'll typically all be favouring the same sectors at the same times, to varying degrees of proportion.

Genuine ben graham style 'money for half price' value is much easier to find in a bear market but it can still be found in a bull market in the small and mid-cap areas or in the out of favour sectors at the big cap level. I think growth opportunities are there in all markets but any stock with future growth factored into the current price has to be selected very carefully and the underlying fundamentals driving growth watched closely.
 
Agree with most commentators. It can be done as always with discipline and time. A big problem is patience and trading as entertainment/punting if you like.

If we look at the last few years on the ASX there have been plenty of opportunities. The former ICI now Orica, from $4.00 a few years ago to $30 now. BHP $9 4 years ago. Caltex and Aristocrat are others off the top of my head would have all averaged around 100% a year. And picking them is not rocket science, just common sense. No 1, they are monopolies in their respective fields. One in the making is OXR, 50 cents 4 years ago $3.79 today, a look at their CEO, the holdings and business plan indicate $12 in a couple of years time.

Another problem is that many advisors say they you have to be diversified. This is codswallup. To succeed you need to research the bejesus out of your target company and when you are sure of it, you go hard and stay while it remains good. If one has no more than five companies to monitor you will get pleanty of early warning that things are going bad.
 
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