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Berkshire Hathaway Inc. Message Board

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  • Novalis_97 Novalis_97 Apr 9, 1998 12:34 PM Flag

    Tobacco?

    I read somewhere that Buffett avoids any industry that is subject or likely to be subject to government regulation. This is why Buffett avoids utilities. The same reasoning could apply to tobacco and Microsoft, though in the case of tobacco I think he avoids it to preserve his personal reputation (which "takes a lifetime to build and just 5 minutes to destroy") and in the case of Microsoft, he avoids hi-tech in general.

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    • Neither Warren or Charlie will invest in anything that they can not "value",
      no matter what the industry. He has stated that he can not "value" technology.

      • 1 Reply to JOPLIN9000
      • As Warren says "he knows the boundaries of his
        knowledge and operates withing those boundaries" (might not
        have the quote exactly). In order to value a business
        one needs to have enough knowledge not just the raw
        numbers and history.

        I would not know how to
        evaluate silver prices to any degree, yet Warren is
        comfortable enough that he has an idea about the future value
        to determine the odds are on his side. I worked in
        technology for over fifteen years and can determine the
        value on SOME technology stocks. And therefore have
        made the odd investment and still holding.

        The
        point is two individuals may be very good at investing
        and evaluating businesses, yet sometimes one person
        can evaluate a business while the other person cannot
        evaluate the same business (then some businesses just
        can't evaluated). One must understand the limitations
        of their knowledge and work within those boundaries.

    • Thanks for your input. From a purely academic standpoint, studying the dynamics of the tobacco industry in relation to investing is interesting. On one side you have financially strong & undervalued companies. On the other side you have the anti-tobacco movement. Right now the battle lines are forming. Smith Barney has a 12 month target of $55 vs. $40 today. Oh, well.

      BRKb hit an all time high today!

 
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