Is Buffett Way Off Base On This One?

By: ispeculatornew
Date posted: 05.31.2012 (5:00 am) | Write a Comment  (10 Comments)

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I’m a big believer in Berkshire Hathaway and in Mr Buffett as I have written many times in the past months on this blog. I like the way he manages his fund, his long term, fundamental based investment method and I admire how patient he has been in holding on to cash when no great investing opportunities were available. Those and many other things are what I’m trying to learn from Buffett.

Clearly, he is not a technology geared person or investor. He has said himself that he spends most of his time looking into piles of papers, financial statements and other documents. You could certainly argue that is is much easier to access this information online but I guess it’s the same info so it doesn’t quite matter. Anyway, it’s not like Mr Buffett is going to be buying shares of Google ($GOOG), Facebook ($FB) or other tech stocks. He likes to buy businesses that are simple and that he can easily understand which has worked incredibly well over the decades. Who could blame him?

Newspapers = Dead?

In recent months, Buffett has agreed to buy many different publications including Virginia’s Richmond Times and almost 100 other newspapers. He said that he saw tremendous value in these stocks. That is certainly a contrarian view in this era where the New York Times (NYT), clearly the gem of the newspaper industry, is worth fractions of what it once was despite a solid publication and brand. Why? Newspapers are going through difficult times as they try to adapt to this new digital era. These times where classified ads and many other types of advertising are moving online where they can be done more efficiently and at a lesser price (often free in fact).In short, they compete with free online publications.

“This is an unsustainable model and certain of our papers are already making progress in moving to something that makes more sense” – Warren Buffett

Who am I to argue with Mr. Buffett? But to me, that seems very difficult to determine frm the perspective of someone who uses the internet and new technology so little. Publications such as the Huffington Post and others are clearly able to compete to some extent. The industry will change in the next few years but I’m not quite ready to say that it is unsustainable. Other publications such as Clusterstock have also been operating under a free model making profits. I’m not saying that newspapers will die, I don’t believe so. Clearly they add some value. But I’m not sure that Mr. Buffett knows exactly what he is getting himself into. It’s true that he paid very little and in that sense has little to lose.

What about you? Do you agree with Buffett’s view?

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  1. Comment by Ken — May 31, 2012 @ 9:43 pm

    Sadly, I think Buffet is past his prime, and I wouldn’t follow his stock picking. For the past couple of years his company has underperformed the market.

  2. Pingback by Dividend Links of the Week — June 1, 2012 @ 4:01 am

    […] 1. Is Buffett Way Off Base On This One? @ IS. […]

  3. Comment by GP — June 1, 2012 @ 6:51 am

    The use of the phrase ‘last couple of years’ is a little silly when commenting on Buffett. He plays the long game.

  4. Comment by Squeezer @Personal Finance Success — June 1, 2012 @ 11:25 am

    I think Buffet has done some smart moves, and some not so smart things like explaining how his secretary pays a larger percentage of her income in taxes than he does. Does Buffet not understand that dividends and capital gains are taxed at a different rate that ordinary income?

  5. Comment by IntelligentSpeculator — June 1, 2012 @ 11:28 am

    @Ken – Not sure I’d say he’s done but I think some of his moves are questionable

    @Squeezer – Haha I’m sure he does but I assume he thinks all income should be taxed in the same way (which I don’t agree with).

  6. Comment by Matthew C. Waterman — June 1, 2012 @ 5:58 pm

    Anytime I start to think that Buffett might be wrong about something, I take a moment to consider that I am the one who is more likely wrong about it.

  7. Comment by IS — June 2, 2012 @ 4:25 am

    @Matthew – Certainly a very fair point yes, but I think it’s interesting to wonder what we could be missing here?

  8. Comment by Poor Student — June 2, 2012 @ 12:53 pm

    While his fund has underperformed the market, you will see that his businesses keep making money and the intrinsic value of Berkshire has increased a lot. I always give Buffett the benefit of the doubt. He has been wrong a couple times but I think he has earned little trust.

  9. Comment by Intelligent Speculator — June 3, 2012 @ 8:45 am

    @Poor Student – True, but I think it’s still very useful to question his moves and his thinking. But yes, great business he has built

  10. Comment by Dave — June 3, 2012 @ 9:49 pm

    @ken. I recall when tech stocks were all the rage on the 90’s everyone it seemed said the same thing about buffet. Out of touch did not know the market. Maybe he is with his decision to buy newsvpaper, time will tell. That being said over the long haul investing with Buffet has been pretty good!

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