“Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be misappraised.”
I want to immediately take this out of the investment realm and bring it into the management arena.
There are two things that I thing of immediately when looking at this quote from Buffett. The first is the only way that unusual circumstances can be identified are if you thoroughly know the industry you're in. There is no way to know if something is unusual, unless you are acquainted completely with what is usual.
The key to it is of course your complete saturation of the purpose you hold and the market you serve. In spite of what may be thought, there really aren't that many people willing to know the intricacies of their chosen fields. Why do I say that? Look at the mistakes made by those in multi-billion dollar corporations that have no excuse for what they do. All they would have had to known is the business they serve.
On the other hand, those that truly know the business they're in and why, are prepared to swoop in at the right times to make significant moves in the market that have lasting value to the company.
Sometimes we hear the phrase that 'chaos offers great opportunity,' and it does. But only to those that have such a strong foundation in what they're engaged in as a company, that they will intuitively know when something begins to rear its head, and whether the situation is a contender or a pretender.
What we need to look for is unusual circumstances that others in the business aren't accurately appraising, nor are able to. It's there that we can make moves for the company that bring it success.
The other side of it is we also will know when to stand still and do nothing, when others think they've seen the prey, and like sharks smell the blood only to find out that there's a hook hidden in the bait that they didn't see.
Great management in my estimation is able to either sit in wait, or take aggressive moves when they know the time is ripe. It doesn't matter if it may take months or years, the point is to know what the circumstances are telling you and either act or don't act based upon knowing your market.
Other Buffett Resources:
Warren Buffett: The trouble with being a legend
Warren Buffett: 'I told you so'
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