He held on to his commodity related stocks(Kaiser, Handy Harman, Cleveland-Cliffs, etc) despite of sharp corrections in late 70s into early 80s.
His star performers were GEICO and Washington Post accounted almost 50% of the unrealized gain.
He summed up nicely how he navigated the 70s in his 1976 letter to shareholders.
You will notice that our major equity holdings are relatively few. We select such investments on a long-term basis, weighing the same factors as would be involved in the purchase of 100% of an operating business: (1) favorable long-term economic characteristics; (2) competent and honest management; (3) purchase price attractive when measured against the yardstick of value to a private owner; and (4) an industry with which we are familiar and whose long-term business characteristics we feel competent to judge. It is difficult to find investments meeting such a test, and that is one reason for our concentration of holdings. We simply can’t find one hundred different securities that conform to our investment requirements. However, we feel quite comfortable concentrating our holdings in the much smaller number that we do identify as attractive.
Our intention usually is to maintain equity positions for a long time, but sometimes we will make a purchase with a shorter expected time horizon such as Kaiser Industries. Here a distribution of securities and cash from the parent company is expected to be initiated in 1977. Purchases were made in 1976 after the announcement of the distribution plan by Kaiser management.
In short, he went for finance, service and commodity stocks to fight inflation and slow growth. He knows consumers will eventually spend money when recessions are over and commodity is a good hedge against inflation.
1 comment:
Great write up, well researched and proper thinking process put in. there was a saying, good judgement came from bad experiences and good experience came from bad judgements.
Wish u luck in ur investments & keep up the good work.
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