[What's your due diligence process?]

This really is a great thread.  Throughout my investing career I've really struggled with the question, "When do you have enough information to make a decision."  I've found myself getting "caught in the weeds" reading about things that have little value in the decision making process.  I also think its a bit overwhelming for novices reading 10ks and so-forth because of all the legal jargon.  You learn quickly that 10ks and other filings are all laid out in a similar fashion.  With practice you'll recognize what can skimmed or skipped entirely. 

 

When Weschler and Combs were on CNBC several months ago, Becky Quick actually asked the question I submitted surrounding this topic.  I've attached the transcript which you can read for yourself. 

 

To paraphrase, Weschler and Combs said they both look at basically the same things others have already mentioned (corporate filings, trade magazines, transcripts, etc.).  The amount of time they spend is another story.  Weschler actually said he'll spend 500-1000 hours researching.  That seems crazy and perhaps is in need of greater context.  I've also heard Wilbur Ross explicitly state that his firm usually will follow a business for several years before making an investment.  Conversely, I believe Monish Pabrai has said a few days of solid research on an idea is adequate for him.  And Buffett is famous for making investment decisions in mere minutes. 

 

This is a curious topic however.  Clearly the more time you spending investing, the more efficient you get with your process and decisions can be made much faster (this is what experience is all about).  This is where Buffett's "compounding knowledge" comes into play.  I think you also have to be very careful reading into things like Weschler's "500-1000 hours" proclamation.  What is he really talking about when he makes that statement?  For most companies, does enough relevant reading material even exist to spend that kind of time on?

 

I've learned that you just really need to do what works for you.  It seems that at some point in the research process, additional information can just become a distraction from the basics of investing: What is the approximate value of this asset?  Can I get it at a discount/reasonable price?

CNBC_transcript_of_Weschler__Combs_investment_process_answer.docx

[DCF Model]

I found comments by Alice Schroeder to be very insightful on this subject.  She is the one person who has had full access to all of Buffett's files containing years of notes and research.  If I remember correctly, she said she never saw one instance where Buffett actually went through a DCF exercise.  In a speech, she said basically all Buffett looks for is investments where the chance of losing money is near zero.  Then he wants a 15% return on day one. 

 

Here's the speech, which is one of the best, in my view, on how Buffett thinks (start watching at about the 20 min mark):

 

I think others have mentioned it in this thread, but I've heard Buffett explicitly state something to the effect of, "The numbers should jump out at you.  If you have to do anything beyond simple arithmetic to figure it out, walk away."

[Tips on BRK AGM]

My first post!  I was at the Yellow Brker meeting on Friday and a nice guy from R.I. suggested this forum.  I'm glad he did and am surprised I hadn't come across it in the past.  Looks like a lot of great discussion. 

 

These tips are of course post-meeting, but for those who may be looking for ideas for next year, here's a few.  I've attended the meeting every year since 2007.  Attendance has gone up noticeably each year (especially this year).  I have personally found it more comfortable and easier to hear sitting in the ballrooms that stream the annual meeting onto big-screens.  I don't show up to the Century Link Center until about 7:10 or 7:15 when the line going into the building is gone.  It works out really well unless you're hell-bent on seeing Warren and Charlie in person (you can always venture into the arena after lunch when a lot of people have left and don't come back). 

 

Also, I should note that I don't even go find a seat until about 8am.  I go straight into the vendor area to see what's new.  Plus, as someone else commented, Buffett always walks around a bit so there's a good opportunity to see him close up.  In years past I've had him 4 feet from me.  But, he's always being surrounded by a mob of media and shareholders trying to get pictures so have that expectation.

 

As far as hotels go, I haven't had much luck finding a decent one for a fair price.  All the hotels in the city jack their prices up 2-4 times for the shareholder weekend.  Next year I plan on taking Warren's advice and look into AirB&B.