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“Meanwhile billionaire warren buffett. Hasn t released his annual letter to shareholders with berkshire hathaway hathaway s earnings over the weekend for more were joined by nathan bell from peters who joins us from our sydney cbd studio nathan hello you certainly are always intriguing when we do get that letter from warren buffett publishing. This letter to berkshire hathaway shareholders over the weekend. What was the key takeaway to your mind excuse.
Me my favorite part was there was a bit that warren buffett made about nine years ago. And the bet was with a fund of fund managers. So this is a guy whose business invests in other hedge funds and the bet was essentially the buffett thought just a pure plain index fund would outperform. This group of five hedge funds that this guy selected.
This is remembering that the hedge funds charge. Very high fees. Then also the fund of fund manager charges. A level of fees on top of that and it s nine years down.
Now at the bit. There s only twelve months to go. And the index fund is just absolutely miles ahead. So the charity.
The buffett selected is going to have a win. But it s just amazing. It s it s not just poor performance from the hedge funds..
Which was a huge part of it. But when you layer on these massive fees on top of it you really as an investor have no chance of beating the index in the hedge fund industry is so competitive. These days. It just shows you that very few people out there particularly managing large amounts of money can compete the index over time well certainly.
We know mr. Buffett. A fan of finding those opportunities. Where others perhaps don t see it and in fact buffett s business partner.
Charlie munger. Recently commented on buffett s recent investments in the likes of apple also us airlines and are these opportunities for for the broader investment community. Yeah i mean buffett s really gone against what he s been saying for decades in terms of the airlines. It s a it s a much more consolidated sector pricing seems to be rational.
But we ve been talking about it in the office as a potential investment and just as soon as we did there so announcements by a couple of headlines that they were cutting fares and this is what you re really afraid of with airlines is that they ll take on new routes. And it s just a lot more competition for and that just completely smashes earnings. Yet alone the impact at higher oil prices might have or the fact that you have to invest billions in a new fleet. So we haven t invested in the airlines apples probably more interesting you ve got various ticket customers and it s interesting charlie munger.
Said that just how competitive the business world is today compared to 20 or 30 years ago. When you know buffett and munger were much younger so there s a lot more opportunities back then and in you know you re competing against hedge. Funds..
And all sorts of investors. So they feel like they ve got a small edge in apple and the airlines. But these are no laydowns compared to some of the investments. They used to make monga also explained.
Why investors might in fact do a lot better in china than in india. Given that india is being flagged as this huge growth opportunity. Perhaps even overtaking china in that respect. What s your view.
Yeah. Munger really slammed the framework that india operates on and just said. The chinese. They really get things done.
We ve got a couple of investments in china. We own the google of china and the amazon of china. We think they re going to be wonderful investments. We were worried about the short term in terms of the macro economic environment china and slowing in fixed asset investment we ve hedged the currency but it was really interesting that munger said china they really get things done.
But also that he thought there was a lot of cheap companies in the country and it s just interesting people are very easy. I guess i guess mixed these days. There s a lot of fear about china twelve months ago..
That fear seems to evaporated. But you ve got some absolutely wonderful business that most people in australia have never really heard. I ve actually have some wonderful national champions in what i would say modern day technology. Sectors so this isn t building apartments that needed but.
010. Which has wechat is wonderful messaging service that offers all sorts of other services that people are locked into these business is going to grow for a long time so we think. It s a really prospective area now i wanted to discuss with you the ise wealth index now over the past seven years. Nathan there.
I see wealth index. Which is managed by an fund manager. Horizon kinetics. Which tracks companies managed by wealthy individuals with large ownership stakes.
News. Such as warren buffett. Has in fact outperformed. The comparable world index that s by more than six cent is sort of large insider ownership.
A reliable predictor of our performance in your view. Yeah that six percent is an annualized figure. So ever seven years you can imagine how much that means to investors large insider ownership is really important to us and probably half to three quarters of the stocks in our portfolio..
Do have managers with large amounts of their own wealth on the line if you think about someone who buys a car and if that was the only car you re ever going to have in your life. You really take care of it so you just don t see these types of managers doing dumb things like making overpriced acquisitions at the top of the cycle. They run really clean balance sheets and they re just really very entrepreneurial. They don t have to go through a bureaucracy to make an important change in the business strategy.
So we think it s one of those few reliable indicators that continues to be something that you can invest on regardless of the reducing barriers in business coming from technology. If you ve got a good management team they can actually adapt in a way that say a central bank can t they ve really only got one lever to affect the economy. Which has interest rates businesses are dynamic. But you need a dynamic leader.
Who doesn t get caught up in bureaucracy. So all those 37 years that we re talking about in that those particular numbers. There s lots of research. That shows the benefits of large insider ownership.
So it s really key for us. Nathan bell. Pleasure to have you with us thank you so much to your time today ” ..
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