In future issues of this Unconventional Wisdom newsletter we will be undertaking a detailed analysis into the investment strategies of the most successful investors in the world. The aim of this recurring piece will be to identify what makes the endowment, sovereign wealth and pension funds from around the world so successful, and what our readers and clients can glean from their experiences. As a pre-cursor to this series of articles, we thought an interesting starting point would be to understand how the most quoted person in the world, Mr Warren Buffet, the ‘Oracle of Omaha’ really invests. It’s difficult to pass through a day without hearing a Warren Buffet quote taken out of context. Seemingly every financial advice, accountant, fund managers, index manager of investor in Australian quotes the Oracle from time to time. Many businesses actually list Warren as the source of their investment inspiration. I’m sure you have seen them before, they may be a one-man investment firm, that lists their investment philosophy around Buffet quotations like: ‘Always invest for the long-term’ ‘Never invest in a business you cannot understand’ ‘Buy and business, don’t rent stocks’ ‘Most people get interested in stocks when everyone else is, the time to get interested is when no one else is. You can’t buy what’s popular and do well’ ‘It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price’ ‘Forecasts may tell you a great deal about the forecaster, they tell you nothing about the future’ Yet, as it always tends to be in the financial planning, stock broking and investment management industry, the same advisers that publish these quotes, tend to recommend the exact opposite of the values they espouse. For one, they rely solely on economic forecasts and broker research reports to make decisions, whether that is in sticking to a strategic asset allocation or recommending the new stock with a buy. If you ask most stockbrokers or investment advisers, they seemingly always think it’s a good time to buy and its never time to sell. Whilst they constantly stress the importance of investing for the long-term, as soon as markets become volatile, the long-term goes out the window, particularly if you call asking them what they would recommend. Most worryingly, Australian investors tend to chase the most popular companies after they have already gone up. One only needs to review the broker reports on the likes of Newcrest or BHP Billiton over the last decade, or look closely at the excessive multiples, even by US terms, that are afforded to up…

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