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Investor lessons from Buffett's USAir mistake

27/5/2020

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In the last few newsletters we've lookedat the USAir case study to try to discern general lessons for less experienced investors than Warren Buffett. So what can we take away?
  1. If the industry economics are appalling, then walk away. Despite the excellent yield on the preferred stock Buffett came close to losing the entire investment because intensified rivalry caused severe operating loses.
  2. Industry economics can change, so you need to keep up to date. In the 1980s/90s the impetus for change was regulatory; in 2020 it was a virus. Other potential causes are social shifts (e.g. greening), technological disruption (e.g. online conferencing), and; economic (e.g. relative costs of manufacturing and shipping for different countries)
  3. Mergers often lower shareholder value. Mergers bring many opportunities for things to go wrong, from resentment of staff to over-paying.
  4. Growth is not important, value is. Many company directors feel it their duty to grow the “top line” (revenue) and expect that to feed through to the “bottom line”. But much growth destroys value. The key factor is ………………To read more subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1
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    Glen Arnold

    I'm a full-time investor running my portfolio. I invest other people's money into the same shares I hold under the Managed Portfolio Service at Henry Spain. Each of my client's individual accounts is invested in roughly the same proportions as my "Model Portfolio" for which we charge 1.2% + VAT per year. If you would like to join us contact Jackie.Tran@henryspain.co.uk

     investing is about making the right decisions, not many decisions.

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  • About
  • Henry Spain
  • Books
    • My Books
    • Other Books
  • Blog
  • Portfolio
    • Buffett-style
    • Modified price earnings ratio
    • Net Current Asset Value
  • Resources
    • glossary of investment terms >
      • A - B
      • C
      • D - E
      • F - G
      • H - I - J - K
      • L - M - N
      • O - P
      • Q - R
      • S
      • T - U - V - W - Y - Z
    • TOP 10 TIPS FOR INVESTORS