Questionersome of you might have seen Yellowstone and there's one particular scene when the Native Americans are attacking and then they say you know circle the wagons C the wagons actually is a term that comes from the 19th century these large Wagon Trails going west you know claiming land and conquering the frontier when the Native Americans attacked the best defensive posture was to put the wagons in a circle and then try to defend as best as you can that analogy might be a good way to think about investing in terms of circling the wagons this year in Buffett's letter he said 58 years of bushire management most of my Capital allocation decisions have been no better than so so and our satisfactory results have been the product of about a dozen truly great decisions and which he's saying is about once every 5 years there's about 300
Questioneronce every 5 years there's about 300 important decisions and he's saying that important decisions and he's saying that important decisions and he's saying that 12 move the needle we have 4% from like 12 move the needle we have 4% from like 12 move the needle we have 4% from like the gods of investing which is doesn't doesn't give us a lot of confidence and doesn't give us a lot of confidence and doesn't give us a lot of confidence and uh I took a stab at what the 12 uh I took a stab at what the 12 uh I took a stab at what the 12 businesses might be one of them I we businesses might be one of them I we businesses might be one of them I we know is a so if you look at the other know is a so if you look at the other know is a so if you look at the other candidates Kos Co CX C's Apple BNSF Mid candidates Kos Co CX C's Apple BNSF Mid candidates Kos Co CX C's Apple BNSF Mid American National Indemnity Gillette American National Indemnity Gillette American National Indemnity Gillette Washington Post and then cap cities ABC Washington Post and then cap cities ABC Washington Post and then cap cities ABC I mean I think the important thing was I mean I think the important thing was I mean I think the important thing was not that they bought these 12 or they not that they bought these 12 or they not that they bought these 12 or they hired a je the important thing was they hired a je the important thing was they hired a je the important thing was they kept them all so it wasn't the buy with kept them all so it wasn't the buy with kept them all so it wasn't the buy with just a dozen decisions he's completely just a dozen decisions he's completely just a dozen decisions he's completely Tred the S&P so even with this 4% great Tred the S&P so even with this 4% great Tred the S&P so even with this 4% great decisions they are like you know at decisions they are like you know at decisions they are like you know at almost 4 million per in annual returns almost 4 million per in annual returns almost 4 million per in annual returns basically the S&P is just a very small basically the S&P is just a very small basically the S&P is just a very small fraction of that so many of you may be fraction of that so many of you may be fraction of that so many of you may be familiar there's a South African company familiar there's a South African company familiar there's a South African company called naspers and naspers used to be a
Questionercalled naspers and naspers used to be a newspaper publisher and they've been around for about 100 years I think 1999 or 1998 they brought in a Hired Gun CEO kous Becker and basically at that time nasas had a $500 million market cap cous in 2001 took $32 million of that and bought a obscure Chinese company called 10cent and he got a 46% stake 46 and a half% stake in 10cent for the 32 million in 2004 when 10cent went public the value of 10cent was about 900 million at the IPO they sold a little bit of a few shares at the IPO so from 2004 to 2018 they never sold a single share of 10 cent in 2018 10 cent as a market cap of 530 billion went from 900 million 10 billion 50 billion 100 billion and they're not touching it at this point you know when the important thing was not that they invested in 10 cent you know because they invested in many other
Questionerknow because they invested in many other things the important thing was that they didn't touch it so again the circling the wagons around 10 cent was really key then we have rakes junjun Wala from India he passed away last year Rakesh was an exceptional investor all the wealth was created organically from his investing and he started with $400 when he was 25 years old and when he passed away it was 5.8 billion which was a tremendous you know 50 6% compounded over 37 years in 2003 Rakesh bought 5.9% of a company in India called Titan Industries which has a brand called Tanish and Tanish is basically a jewelry and fashion retailer so he owned 5.9% and then by 2011 he had increased his stake in Titan to 11% the second 6% or so that he bought or 5% that he bought he paid almost 20 times what he paid for the first 6% which is Cy logically really hard for us to do you know but he
Questionerreally hard for us to do you know but he amazingly kept adding to his Titan position at higher and higher prices basically the 3.7 million became more than 1.4 billion and if everything else had gone to zero after 2003 for him he would still be $400 to 1.4 billion so then we have Ben Graham very famous for net net investing and you know deep value and so on but in 1948 he bought half of Geico for 712 ,000 Ben's you know Cornerstone of the gramian approach to investing was that you buy things well below liquidation value and definitely well below intrinsic value when he starts approaching those valuations you sell them then you go back and find something else he never applied that to Geico he applied that to all his other stocks he never applied it to Geico and so when he passes away in 76 that 72,000 is 95 million excluding dividends the other thing is that he
Questionerdividends the other thing is that he would be very Diversified but he put 25% of the portfolio into Geico and if everything else again had gone to zero he would have still been done twice the S&P you know 12.9% versus 6.9% and when he passed away it was more than half of his net worth so you know compounding is the eight wonder of the world which Einstein tells us and if you really look at you know the magic of compounding there are three elements that come in when you're looking at compounding your starting Capital your annualized rate of return and the length of the runway for example if I have a 7 % return a year applying the rule of 72 it will take 10 years for my money to double if I have a 10% return rate of return again applying the same rule 72 it'll take 7 years so basically you can switch and change one variable for the other if you're
Othervariable for the other if you're interested in the final outcome being a really large number it could be a really large number by starting the large number and having a short Runway and even a small annualized rate or it could be you start with a really small number and some kind of a rate return and then the runway