Jim Hawthorne

Buffett Metric Doesn't Say It's Time to Buy

Nice article, Todd! As usual, you dig beneath the shrill headlines and the 30 second sound bites!

Despite the reams of articles supposedly describing either the 'Buffett-style of investing' or reporting on what he has or has not done, many still fail to understand or appreciate the simple, patient elegance of his investing methodology.

This investment methodology is based on fundamental valuation (including management competence), LOB/product/service prospectus, and long-term viability.

Buffett does not so much time the overall market as time the 'reversion to the mean' of the individual equities on his radar screen, snapping them up when they fall well below projected valuations.

While we can indeed chart Buffett's moves and see how he moves into positions after deviations from the mean, he has never lost sight of the simple fact that charts are driven by price action through time; Price is not driven by trendlines on a chart!