Category: Money tips Release Date: 2005-12-27
Buffett is undoubtedly the modern master of the most successful stock investment, but he also is inevitable that investment "walking Mai city" actual combat experience, invest in airline stocks is his largest investment failure.
"In any choice of the timing, I just look for some after-tax return on investment the highest rate of investment." Buffett to explain the same time, the risk arbitrage said: "The stock market is expected to have much probability of the incident? You allows cash is stuck with how long? what chance ------ such as release of the stock acquisition of competitive pricing? when the expected event does not occur, you have to do? "In order to assess the risk arbitrage, you have to to answer four questions.
American Airlines in 1989 in line with Buffett's harsh on the strict stock-picking strategy. In July 1989, Buffett's Berkshire Hathaway holding companies to invest in the U.S. Airways 358 million U.S. dollars, and can be converted from a special unit to profit 9.25%. The Unit can be converted into ordinary shares of 60 U.S. dollars per share. Ten years later, if Berkshire did not convertible, then American Airlines to buy these shares. At that time the U.S. Air common stock price is 50 U.S. dollars per share. From 1981 to 1988, American Airlines has been an impressive blue-chip investors, and its return on equity averaged 14%, pre-tax net income rate of 8% to 12%. Although Buffett bullish on the airline industry, but after all not as good as the media industry to invest in less familiar with, so that the Berkshire Hathaway investment in convertible special shares, similar to preference shares rather than ordinary shares. And the aviation industry, high barriers to entry, competitive industries are oligopolistic, Buffett convinced that the U.S. airline's common stock should have a good performance, his investment in the Special Unit will also be continued to rise, but the results had not met expectations.
The deterioration of low-cost airline begins to take Airlines and bankrupt airlines have committed suicide as a pricing strategy. Air services as a commodity, consumer choice is often determined by the price. When the low-cost carriers have to fight for market share, they will continue to cut prices; and when an airline bankruptcy, it can be free from the financial crisis continue to provide transportation services, in order to earn cash, bankrupt airlines will below cost to provide services. The result is an industry-wide disaster, American Airlines such blue-chip companies to its knees. This investment is Buffett, one of the few failures, the failure of another large investment firm Salomon losses. The U.S. airline industry has not yet been out of the quagmire of industry losses, large airline bankruptcies are still heard from time to time.
Similar to Buffett's investment mistakes have occurred in China, the most typical case than the appliance industry: whether it is color TV or white goods, have been the cradle of blue chips, Changhong, Haier, Chunlan, Konka has been a high-priced stocks representative of blue-chip stocks. Even small praise the stock market economist Wu Jinglian also praised the performance of Konka, but at lower prices competitive strategy involved, the current home appliance industry has become a low-profit industry.
Annual disclosure is now a time when the peak period, when investors read the statements, should not have a simple stock selection according to price-earnings ratio. For those who have significant fixed costs and excess capacity of the industry, as well as at the peak price of resources stocks, low price-earnings ratio is not a good thing.
