Devoted to Managers and those that seek to improve their management skills

Seeing What Others Don't See

It's amazing when people continually watch Warren Buffett look at companies and every time he buys one or buys stock in one, a large number of professionals speculate on what Buffett may have seen in the company. They are clueless.

One example of this is when he bought into Wells Fargo (WFC) for $290 million, which he purchased when it was "less than five times after-tax earnings." It was during the time when the banking industry had been pummeled and was bloody. What Buffett saw was that Wells Fargo - for the most part - was being implicated more by association to the industry than by its involvement.

At the same time he looked at RJR Nabisco and bought their junk bonds in 1989. While this wasn't typical for Buffett, he saw something the market in general didn't see: Nabisco was able to cover their credit obligations.

As we talk about with Buffett all the time, even when he bought into what seemed like very risky situations, he always kept a margin of safety in mind as a backdrop to the investment. It's something he learned and held onto from Benjamin Graham.

This post isn't about investing, but in understanding the tremendous value in seeing what others don't see as managers. If someone doesn't see it, you have an extraordinary advantage over your competitors. This is especially true with your products or services which aren't as easily identified as investing in companies is with Buffett.

One of the reasons Buffett is able to indentify and successfully navigate risky waters is that he works within a framework and disipline that keeps him within parameters that offer a margin of safety. Occasionally those parameters cause him to lose out on something important, but he never loses where it will seriously damage the company.

Another reason he sees things is because he is a student of what he does. There's probably no one in the world today that knows the condition of businesses and the quality of management in them like Buffett does. When you combine that with the framework he works in, it reveals something of what makes him so great at what he does.

Other Buffett Resources:

Wisdom of Warren Buffett

Warren Buffett, investor

Warren Buffett: The trouble with being a legend

Warren Buffett: 'I told you so'

Company growth

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