Back to Intrinsivaluator

By Adam Leitzes & Josh Solan

Mail               Archives               Current story               Index

In the Buff

Late last spring witnessed the B-School version of Beatlemania as Warren Buffett addressed a packed house at the University of Pennsylvania's Wharton School. One thousand MBAs, undergraduates and professors crowded into Penn's largest auditorium to hear the wisdom of the greatest investor of our time. And yes, your lowly columnists were right up there in the nosebleed seats, mouths agape, eyes riveted, just thankful we weren't among the more than one thousand people turned away at the door.

An elated Jeremy Siegel, author of Stocks for the Long Run, introduced the man whose Berkshire Hathaway defies all Wharton logic by racking up unprecedented gains without ever paying a dividend. It was Buffett's first return to the school that he attended more than 50 years earlier. And although the Penn public relations department probably would rather we not mention it, the Oracle of Omaha dropped out of Wharton in his sophomore year, supposedly telling his roommates: "There's nothing more they can teach me here."

Buffett's biggest problem these days is money; he's got far too much of it. Without the burden of billions, the Oracle of Omaha estimates he could rack up 100% annual gains easily. And all that without involving himself in the world of dot-coms. "I don't care if 10,000 people at a cocktail party are making money with Internet stocks," Buffett says. "I can't value them."

But if Buffett can't figure out the Internet, perhaps the Internet can help us Buffett-wannabes figure out the master. The sites that follow range from message boards to fan sites to stock screens. Each provides a piece of the puzzle in explaining how Buffett has picked nothing but winners since he was 11.

Pitiful as it may seem at first glance, berkshirehathaway.com should be the first stop for any aspiring Buffetteer. "Being a lifelong technophobe, I tiptoed into the computer world only a few years ago," Buffett self-deprecatingly explains in the welcome to his site. While Buffett's lack of Internet savvy is abundantly clear, the site's bland design is deceptive as it allows the master investor's insight to shine through uncluttered. Archived on the site are full annual reports for the past four years and all of Buffett's revered Shareholder Letters since 1977. If you're a real Buffett nut, you can even order some hideous Berkshire active wear, though you'll have to print out the online form and mail it in--the firm's e-commerce efforts are slightly behind the times.

If Buffett's prized discourse has piqued your interest in the company, head on over to the Berkshire Hathaway Intrinsivaluator. This intriguing tool estimates the intrinsic value of Berkshire Hathaway based on a slew of parameters that can be preset or fiddled with by any web user. Buffett is a notorious student of intrinsic value, so examining Berkshire with this method is an interesting exercise. Using the preset values provided at the site, Berkshire's Class-A shares appear to be trading at approximately 70% of the company's intrinsic value. Does that make Berkshire a buy? Not necessarily. "The shares were much cheaper historically compared to any measure of intrinsic value," notes John Kish, Intrinsivaluator's webmaster.

If you'd like some further analysis to back up Kish's calculations, consider visiting some of the many message boards devoted to Berkshire and Buffett. Two of the most popular are the Motley Fool and Yahoo! boards. While web-based message boards have developed a particularly tainted reputation, the Berkshire boards are surprisingly insightful. With Berkshire trading around $60,000 per share, the firm maintains a fairly elite crowd of investors; most day-trading hypsters steer clear of this high-caliber security.

Several smaller sites from Buffett fans are excellent sources of info. The Toronto Investment Club keeps tabs on all Berkshire and Buffett news and provides commentary on value investing and security analysis. Rich Rockwood, a recent college graduate, maintains his shrine to Buffett at http://www.geocities.com/WallStreet/Exchange/5144/, which includes numerous articles and answers to frequently asked questions.

If you want to generate returns like Buffett, you'll have to pick stocks like he does. While it may be tough to top the greatest stock-picker of all time, the web can give you a leg up with some helpful stock screens. MarketPlayer.com's Warren Buffett Stable Growth Screen is a good place to start. As the site explains, the screen's developers attempted to construct parameters that would have identified Coca-Cola as an attractive investment when Buffett bought the stock in 1988. The secret appears to be a focus on stable earnings and a historically low relative price/earnings ratio. Interestingly, the screen identified International Dairy Queen as one of the 16 companies that matched the Buffett criteria back in 1997, right at the time of Buffett's purchase of the company.

With sites like these revealing Buffett's next moves, perhaps we should follow in the master's footsteps and drop out of Wharton too. We've got a few months to decide. We'll run a few screens, try our luck and let you know.

Josh's Grade: B +
You can't dispute or diminish Warren Buffett's success. You envy it; you wonder at it; you try to analyze it--examine it upside down, inside out and sideways. But, alas, you will never duplicate it. Call it karma, charisma or a voodoo spell, Buffett's uncanny ability to pick 'em comes from deep down inside and nowhere at all. With that caution in mind, go out there and try to imitate Buffett's style of investing, because if there is one thing today's market needs, it is a focus on value.

Adam's Grade: C
"No one can not understand Coca-Cola," Buffett told students at the
University of Florida in late 1998. "No one can understand the Internet." Don't expect the Internet to help you understand Buffett, either. If you simply use the web to research companies, read reports and follow the news, you'll be well on your way to emulating the legendary investor's tactics. Don't expect any intrinsivaluating or stock screening to let you skip out on the hard work of securities analysis