In addition to being the world’s most well-known investor, Warren Buffet may also be the world’s most well-liked billionaire. He’s probably one of the most listened-to men in the world as well. He’s especially popular among other investors—I suspect a vast majority can cite at least a few Buffett maxims more or less accurately.
There’s the well-worn, “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” Hopefully you know that one and try your hardest to do the same (although it’s difficult, I know).
There are the snarky ones, like, “Only when the tide goes out do you discover who’s been swimming naked.”
His aphorisms on value investing are some of the most succinct: “If a business does well, the stock eventually follows,” “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price,” and “Price is what you pay. Value is what you get.”
Warren Buffett also has plenty of followers who invest in his footsteps, or at least according to his tenets, as well as devoted Berkshire Hathaway shareholders who travel to Nebraska for his annual meetings and hang on every word of his annual letters. His name has been in the titles of more books (at least 47) than any other non-political figure. The bottom line is, when Warren Buffet talks, people listen.
However, there’s one Buffett-ism that just doesn’t seem to be able to get through investors’ skulls. It’s not being fearful when others are greedy—most investors at least try to do that—or the reverse. It’s not even his unusual stance that he should be more heavily taxed.
No, Buffett’s big idea that too many investors ignore is his confidence in the future of America. As he wrote in his annual letter to shareholders just over a week ago:
“Money will always flow toward opportunity, and there is an abundance of that in America. Commentators today often talk of ‘great uncertainty.’ But think back, for example, to December 6, 1941, October 18, 1987 and September 10, 2001. No matter how serene today may be, tomorrow is always uncertain.
“Don’t let that reality spook you. Throughout my lifetime, politicians and pundits have constantly moaned about terrifying problems facing America. Yet our citizens now live an astonishing six times better than when I was born. The prophets of doom have overlooked the all-important factor that is certain: Human potential is far from exhausted, and the American system for unleashing that potential—a system that has worked wonders for over two centuries despite frequent interruptions for recessions and even a Civil War—remains alive and effective.
“We are not natively smarter than we were when our country was founded nor do we work harder. But look around you and see a world beyond the dreams of any colonial citizen. Now, as in 1776, 1861, 1932 and 1941, America’s best days lie ahead.”
It’s a beautiful, uplifting sentiment, and I couldn’t agree more. Even in my relatively short life, I’ve seen the human race make more progress than I could ever imagine. Most of us now carry more computing power around in our pockets than was on the Apollo 11 spaceship. And I expect the future to be just as astounding.
So why do so many investors, analysts and pundits—who have just lived through the same few glorious decades Warren Buffett and I have—constantly worry, complain and warn about the future?
Some of it can be attributed to the attention-getting factor—the same reason there’s never any good news on the front page of the paper.
But that shouldn’t affect newsletter editors, whose subscribers pay them in advance, whether they read the letter or not.
Nevertheless, my inbox is constantly flooded with warnings about rising oil prices (and the economic backsliding they could cause), rising food prices (and the riots they could cause), rising metals prices, rising budget deficits, not-falling-fast enough unemployment and all manner of other woes and worries. Just within the last six hours, the following three rays of sunshine slid into my inbox:
“As Brent crude oil prices skyrocketed to $120 a barrel at one point in February, suddenly the risk of a major ‘oil shock’ crippling the global economy in the months ahead is something we have to take very seriously now.”
“In addition to the report that new home sales and mortgage applications unexpectedly plunged sharply in January, the number of new jobs created in December and January were huge disappointments.”
“The new highs list is pitiful—not large nor broad—it is narrowly focused on stocks that benefit from inflation, and stocks that benefit from our current malaise in our economy—and frankly, the maudlin times we live in here in the USA as we slide into awkward socialism. And you tell me—do you think things are sliding? I do, and I don’t like saying that—but, there it is.”
I could find just as many examples any day of the week—today it’s oil and food prices, but there’s always something to worry about. A few weeks ago, as the market soared to its highest level in years, many analysts were warning that there weren’t enough bears around.
I’m not suggesting you should ignore risk—there are plenty of real problems facing our country and our world today. However, worrying about a problem never solved it. Plus, if you’re aware of a risk on the horizon, the market is already aware of it too.
So instead of bemoaning the terrible things that could come to pass, acknowledge them, prepare for any direct effects on you and your portfolio (put stop losses in place, for example) and move on. Warren Buffett has pretty good advice for this situation too. Berkshire Hathaway’s home-building businesses haven’t been doing so great recently, for obvious reasons. But rather than worrying about them, and obsessing over the latest data on home sales and mortgage application rates, Buffett takes the long, optimistic view. In his letter to shareholders he wrote:
“A housing recovery will probably begin within a year or so. In any event, it is certain to occur at some point. Consequently: (1) At MiTek, we have made, or committed to, five bolt-on acquisitions during the past eleven months; (2) At Acme, we just recently acquired the leading manufacturer of brick in Alabama for $50 million; (3) Johns Manville is building a $55 million roofing membrane plant in Ohio, to be completed next year; and (4) Shaw will spend $200 million in 2011 on plant and equipment, all of it situated in America. These businesses entered the recession strong and will exit it stronger. At Berkshire, our time horizon is forever.”
Of course, it’s easier to have a time horizon of forever when you have Warren Buffett’s money—many ordinary investors can’t afford to wait as long as him for their bets to pay off. But, even if you don’t have a billionaire’s timeline, you can still benefit from taking the long view. Most of what worries investors is very short-term in nature: tomorrow’s jobs report, the month’s housing numbers, minute-to-minute oil price fluctuations.
So when things begin to seem dire, just take a step back and remember: America’s best days lie ahead. It will not only make you a better investor, it will also make you happier.
OK, now that you’ve done that, I have just the stock for you! It’s a nimbly managed blue-collar staffing agency, and it was recommended in last week’s Dick Davis Investment Digest by Benjamin Shepherd, Editor of Louis Rukeyser’s Wall Street. He wrote:
“It’s not unusual for temporary staffing to be the best-performing sector of the labor market in a post-recession environment. As economies improve, reeling consumers struggle to find their footing, leading to lumpy demand for goods and services. This translates into slow hiring. Employers often choose to hire temporary workers in such an environment because it saves costs until the economy builds a full head of steam. TrueBlue, Inc. (NYSE: TBI) is a Tacoma, Washington-based temporary staffing company that focuses on blue-collar workers. ...
“TrueBlue successfully navigated the downturn in the labor market and managed to post stronger earnings than many of its peers. Many expected the firm’s heavy emphasis on serving the construction sector would lead it to falter as the recession deepened. But after an initial stumble in earnings, TrueBlue’s management shifted its focus to meeting the needs of light industry, manufacturing and other blue-collar jobs.
“Despite being known for working with small and midsize companies, the firm aggressively expanded its relationships with larger employers. Additionally, TrueBlue moved aggressively to reduce its headcount and to close staffing offices that produced low business volumes. Those moves have led to impressive growth in same-branch revenue—up 23% in the most recent quarter—as demand for temporary workers has soared, particularly in the manufacturing sector.
“Based on that strong improvement, the firm’s total revenue in 2010 should be just over $1.1 billion, and 2011 revenues— currently forecast at $1.2 billion—should surprise to the upside. Several developments will benefit TrueBlue in 2011. The company’s extensive relationships with small and midsize businesses—usually the first to hire as the economy improves—should help drive placements. Additionally, tighter regulation of the trucking industry will take effect this year, including shorter work hours for drivers, which should benefit TrueBlue’s Centerline staffing brand.”
Everything about this company looks great, except its chart, which is lacking momentum. Seeing a little positive conviction develop there would be a welcome sign. In any case though, if you’re as confident about America’s future as Warren Buffet, TrueBlue is practically a pure play on our potential.
Click here to learn more about TrueBlue and other top stocks featured in Dick Davis Investment Digest!
Wishing you success in your investing and beyond,
Chloe Lutts
