Ignoring the advice of legions of bitter waegookin, Warren Buffet has actually decided that South Korea isn’t such a bad place after all. After decades of sound financial decisions guiding Berkshire Hathaway into one of the most successful investment holding companies in the known universe, 77 year old Warren Buffet thinks that for 2008, South Korea may actually be a safer investment bet then the U.S.
Per a UK financial journal:
Last weekend the world’s most famous investor Warren Buffett unveiled his thoughts on the current global investment climate at his investment firm’s annual shareholder meeting in Nebraska – tipping South Korea…
At the Berkshire Hathaway gathering, when asked what he would do with a million dollars to invest, the world’s most famous investor, dubbed the ‘Sage of Omaha’ Buffett replied: ‘I could find better things to do with a million dollars probably in Korea than I could probably find in this market (the US).’
Emphasis mine. Now this may have something to do with fact that POSCO made him $2.14 billion in a little over a year from just a $572 million investment. Hell, with return rates like that, even the most bitter waegookin (provided he’s an investor) would love Korea.
Other Korean stock tips can be had here.
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Har har. Warren Buffett knows what he’s talking about when it comes to investment. But it also looks like he has a pretty good time when he visits Korea — with the parades and all. His perspective may be different from other investors who are not beloved icons. My point over at Korea Law Blog is that although most foreign investors can do well, the appalling lack of protections available when a management dispute arises, the union gets squabbley, or the government turns on you is off-putting to many — Buffett not included, it appears. His opinion may change if one of his companies develops a problem.
As for the second article, it appears Korea is being recommended as a contrarian play for portfolio investors — it’s good because it’s cheap, and it’s cheap precisely because the investment environment sucks so bad, a point which the article makes expressly. That’s a valid viewpoint, but it requires a lot of faith in Lee Myung-bak. Note that Korea is generally pretty welcoming to sit down and shut up portfolio investors (the same deal offered to most domestic investors too) — it’s foreign management of foreign-invested assets that upsets the Pride™.
Hardly a ringing endorsement. Sounds more like a back-handed compliment to Korea or real put-down of the US.
To understand why Warren Buffett is esteemed among foreign investors here is to understand Berkshire Hathaway’s investment stategy. Berkshire Hathaway targets companies that are not merely good at what they do, but also possess a ‘moat’ of sustainable competence and comparative advantage that protects the company. Further, while Berkshire is not adverse to selling in the short-term (viz, China Petroleum), their strategy is to buy and hold companies. In this respect, they differ from investors who are focused more on demonstrating quarterly profit than promoting portfolio growth. Also, while they prefer to buy up entire companies, they are not adverse to buying into winners, and in this way they also differ from others who seek to possess controlling interest simply so that they can sell at a later date.
Frankly, Buffett makes no secret of his investment stategies. His annual letters to shareholders provide a good sense of who he is and what he does. Anyway, I’m not at all surprised that he is viewed and treated differently.
Koreans think his last name is 뷔페. Everyone in Korea loves 뷔페.
^ I dunno if you’re joking but most Korean news outlets spell his name ‘버핏’.
Call me when Jimmy Buffet says something about Korea.
As a Berkshire Hathaway investor, Jimmy’s made a mint over the years, and usually lets ‘Uncle Warren’ do the talking for him. Still, he has had a few words to say.
Taiwan
gbnhj makes a good point about why Buffett is tolerated by Korea: he generally invests in Korean companies via more or less passive stock positions, i.e., he lets the Koreans play with his money. That’s been the preferred Korean approach to foreign “investment” for most of its modern history, the only major difference being that in the past such “investment” generally was limited to foreign bank loans not foreign equity positions. It’s still very different from FDI, for which Korea still has very little stomach, although it is (since the 97-98 debacle resulting from the previous reliance on bank debt that was, or was perceived to be, guaranteed by the full faith and credit of the ROK) now possible to make more or less unrestricted equity investments with operational control (as opposed to pure portfolio positions – which is what with one exception (an indirect one, at that, via an Israeli company)of which I am aware — Daegu Tech — Buffet’s investments in Korea are limited to.)
Even my basic math skills has me thinking that investing in a weakening won against the a weaking dollar isn’t the smartest of moves.
Live rates at 2008.05.07 04:52:05 UTC
1.00 KRW = 0.000978125 USD
South Korea Won United States Dollars
1 KRW = 0.000978125 USD 1 USD = 1,022.36 KRW
the main reason securities are undervalued is because of north korea. if that’s what you mean by “investment environment”, then you are correct.
If Buffett’s statements cause foreigners to invest in Korea, they will move in dollars, yen, pounds and euros, and convert that money into won to buy local assets, thereby driving up the value of the won. This is my hope, as someone who wishes he had bought dollars last year at 920, and still hopes to soon.
I guess they could buy the NYSE-traded dollar-denominated GDRs discussed in the link in the original post, but I assume those likely track the KSE pretty closely. Could be wrong…
Now this may have something to do with fact that POSCO made him $2.14 billion in a little over a year from just a $572 million investment. Hell, with return rates like that, even the most bitter waegookin (provided he’s an investor) would love Korea.
I invested in POSCO last year and took a loss (although fortunately I pulled out soon after). Since the end of 2007, Posco shares have dropped from a high of 195/share to its current 128/share. I can only guess Buffet pulled out his money at the end of 2007 (otherwise his profit would be about half of what he claims).
The only way for Buffet to have made such gains in the market (about 400%) is if Buffet had picked up the shares at its lowest (about 45/share) around 2003 and pulled out at the stock’s peak.
I remember right around the time posco peaked, all the papers in Korea were praising Buffet’s approval of Korean stocks, bolstering support for posco in particular, attracting more investment for the stock just before the stock started dropping. Interesting coincidence.
My guess would be that what Buffet really appreciates in Korea is not so much the country’s economy as what he can get away with here.
before i even opened this thread, i wondered how long it would take the bitter expat to explain to the audience that either buffett has no idea what he’s talking about OR he’s being bribed to say what he’s says.
first post, i see.
And I wondered how long it would be before the han-addled and guilt-driven foreign- resident Korean stepped in with a complete misrepresentation of someone’s position. You really are a pathetic troll, pow-pow
judge judy — I don’t believe that’s the main reason for the “Korea Discount”. At least, the possible “North Korean threat” is rarely — if ever — discussed at the investment conferences I sometimes attend, while corporate governance and government harassment and double-talk are. And they’re usually discussed in very derisive terms.
pawi — Nobody said anything of the sort. Buffett may have a different perspective simply because of who he is.
My gf enjoys trading Korean stocks via the internet. We were discussing this the other night. I’m trying to get her acquainted with the concept of the P/E ratio. She was complaining about some shipbuilding company stock she had bought and sold which had only produced a return of merely 7%. Judging by how my 401[k] is doing these days, the 7% return looks awfully good.
FYI,
Samsung stocks may be undervalued. It’s trading at 14x p/e whereas Sony (a peer company) is trading at 38x.
http://www.koreatimes.co.kr/ww.....23488.html
Sorry to comment on spelling, but it’s pretty egregious –> better investment bet than, not better then.
#17 – 7% isn’t bad at all, that’s $700 in your pocket if you invested $10,000. Of course it all depends on the amount of time you invested. 7% in a day would be a rockin day trade, whereas 7% over the year is pretty slow indeed.
It’s been killing me too.
Hmmm….today’s FT:
Citigroup considers $400bn asset sale
Could it be…? A major pullout from Korea?
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