Tim, Warren Buffett, and the KU School of Business

Yesterday I had the opportunity to join Warren Buffett for an hour and a half question and answer session at Berkshire Hathaway's headquartes in Omaha (with 74 of my best friends from the KU School of Business) it was an incredible opportunity made possible by Professor Mark Hirschey from KU.

Buffett spoke to us for about an hour and a half, followed by a presentation from my Securities Analysis class, which recommended that Berkshire purchase Les Schwab Tire. Les Schwab is a privately owned, independent tire dealer in the Pacific Northwest. Les Schwab has a phenomenal profit sharing plan and a focus on employee development and customer service. It is a unique combination that helped the company build a sustainable competitive advantage is a commodity business.

The opportunity to learn from Buffett in such an intimate setting was incredible, the highlight of my time in business school. Buffett reiterated his faith in the teachings of Ben Graham, the father of value investing. It was great. Listening to Warren discuss some of the investment decisions he made, and how he got started was incredible. Listening to the clear, concise way he thinks about business re-ignited my passion for value investing like nothing else could.

I was lucky enough to be in the second row for the question and answer session. While being ten feet from Warren didn't improve the learning experience, it did make it really cool.

Buffett is by far the most successful investor ever, spending time with him was learning from the master. This was an event that I will never forget.

Timothy Burger

Infosys: What Now?

Last week I wrote a report about Infosys, in this report I recommended buying the stock, now the stock has reached the target price I put on it and I have to decide if I should sell or not. Let me back up a little and let you know how I got here.

First off, Infosys is the second largest IT services company in India they are the people who get the "outsourced" jobs. Infosys provides a variety of programming and IT project services to US companies using cheap, Indian professionals. Infosys has grown revenue at a 30% annual rate for the past five years, including 49% revenue growth during 2004. Infosys is really a growth story, it is poised to be a real global player and stands to benefit directly from free trade in services.

The problem is that Infosys is a growth story, and I think of myself as a value investor. The stock has a P/E ratio of 37, twice the market average. My own valuation requires the company to grow at 20% per year for the next 5 years. The company competes with companies like Accenture, IBM, GE and a host of other Indian IT companies, that could make it pretty difficult to grow revenue at 20% per year.

I normally don't like growth stories because I don't like investing in situations where management has to do something incredible or else shareholders lose money. I like value, cheap stocks, so cheap that if management does anything right, shareholders make money. So how the hell did I get tangled up in a growth story? Warren Buffett.

I just finished Phil Fisher's Common Stocks, Uncommon Profits, long story short Fisher was a major influence on Buffett and Fisher's essential message is: buy great, growing companies, hold on to them, make a lot of money. Fisher argues that even if a great company's stock gets as much as 35% overvalued in the short term, if you hold on in the long term you will make more money than if you sell the stock.

So here I am, owning stock in what might be a great company that could really make some money, with a stock price above my own estimate of value, but with Phil Fisher staring back at me from the cover of one of the best books ever written about investing.

So, do me a favor, read the report (as well as this one from UBS) and let me know what you think at timothyb@timothyburger.com

Timothy Burger