How many businesses have you looked at (question to buy-side PMs/analysts)Subscribe
I have always wondered how Warren Buffett could beat Wall-Street in compounding wealth despite lacking the Street's resources. Wall Street banks and investment funds have access to troves of databases, computing power, intelligent/hard-working analysts and yet few can match the returns that a 25 year old kid produced working out of his bedroom.
One thing that struck me about Buffett was how much he read. As Warren Buffett said in his 2001 annual meeting:
"When I started, I went through the manuals page by page. I went through 20,000 pages in the Moody’s industrial, transportation, banks and finance manuals -- twice. I actually looked at every business -- although I didn’t look very hard at some."
I have always wondered how he could understand a business by looking at the one-page tear-sheets that rating agencies produce. I have tried doing this myself - going through Moody's China manuals, going through value-line one-pagers but I find it impossible to feel confident that the 15-20 minutes i spent on that page gave me any useful knowledge.
The question I want to ask WSO industry veterans (especially buy-side PMs/analysts) is how many businesses do you look at, on average, in a year. To some extent, I want to understand whether making excel model is really worth the time it takes. Many buy-side analysts I know spend months evaluating a single investment opportunity but I want to understand if you feel that you are missing out on the breadth of your research (number of companies you have looked at).