Decoding Wall St. Daily Newsletter​: Understand​ing Warren Buffett

Warren Buffett’s annual letter to his company’s shareholders is eagerly awaited by zillions of people all over the world. Whereas some John Doe CEOs pen a short annual letter and shareholders of that company only care, when Warren Buffett speaks on this PDF document people are jotting down investment words of wisdom (and trying to decode what company he will buy next). Why not, after all, the guy is truly a legendary investor and a larger than life individual, right up there with a Bill Gates, and maybe even the president.

While the rest of the world returns to work today and is tasked with reading Buffett’s annual treasure trove of knowledge (be smart: read it on the weekend so you could talk about it immediately on Monday), we wanted to present a bonus piece of sorts we fond from Buffett in the latest edition of Fortune magazine. As we read the piece we couldn’t help but to think it was more interesting than the actual annual letter, which was a big bonus to Fortune’s subscribers.

Warren Buffett on Investing:

“At Berkshire Hathaway, we take a more demanding approach to the definition of investing, defining it as the transfer to others of purchasing power now with the reasoned expectation of receiving more purchasing power in the future.”

Decoded: Upon a quick glance of this statement it makes little sense. After a couple reads one unearths a pretty neat decoded message. Buying a stock of a company involves giving up money you have to spend now (sound smart: purchasing power) to others (in Buffett’s case, to many family run businesses he has bought through the years) in the hopes of getting that money back plus extra money (sound smart: return on investment) in the future.

• Wow your friends with this: Warren Buffett enjoys buying businesses, but not any run of the mill businesses, instead ones with “wide moats.” A wide moat is a business with significant long-term advantages compared to competitors, such as Coca-Cola’s secret cola formula, strong brand name, and highly automated distribution facilities.

Decoding The Experts: Up Close and Personal

Robert Lang: Veteran Trader and Columnist for theStreet.com

• Twitter: @aztecs99
• Website: www.explosiveoptions.net

Our featured trader Robert Lang is a veteran in the field. He manages other people’s money, meaning his butt is on the line every day to first return that money to them and then second, make money for them. He is an accomplished author. If that wasn’t enough, he also writes alongside Editor in Chief Brian Sozzi for theStreet.com, where they both try on a daily basis to package the complicated world of investing into something digestible for thousands of people. We asked Bob for a few insider tips on trading stocks, which is seriously different than investing (buying a stock and holding it for six months or longer is the general rule of thumb).

Insider tip #1: “Trading requires flexibility and nimbleness”

Decoded: A stock trader may look at fancy charts on a computer screen and read the news and decipher that XYZ stock would make a good “bet.” After two days of “being in the position” said trader may be sitting on a 5% loss in spite of the many favorable aspects he/she believed existed before buying the stock. So now what? The trader could:

1.Understand he/she missed a piece to the puzzle and sell the stock (flexible).
2.Reevaluate his/her reasons for buying the stock in the first place and if still ok, buy more of the stock at a cheaper price (nimble).

Please reach out to newsletter@decodingwallst.com to obtain the entire newsletter for today.

Based on the book co-authored by former CNBC anchor Nicole Lapin and Wall Street analyst Brian Sozzi, Decoding Wall St., the daily Decoding Wall St. newsletter is a lifeline to unlocking, and acting upon, an endless array of hidden financial and world news clues. On FaceBook and Twitter, Decoding Wall St. releases unique streaming content daily, as a compliment to the newsletter, to help get you through interviews right on down to after work cocktail parties.  For more information, including to join the movement, please visit www.decodingwallst.com.