Value Microcaps Motherboard

[jtomm]

OT - Buffett Article Misleading and Misquotes

This is nothing against 10bag or anyone else who may have ever copied and pasted the Buffett article, as I've seen it numerous places recently. But I do object to the originator of this spliced article, whoever that was. We should always be after the truth. Somebody spliced a few things and changed a few words which drastically altered what Buffett said. They make it sounds like Buffett would be investing in tiny, pink sheet companies.

Buffett made no mention of the pink sheets or what size market cap he's talking about in the Business Week piece. Here is the entirety of his quote regarding small companies in the BW piece:

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"If I was running $1 million today, or $10 million for that matter, I'd be fully invested. Anyone who says that size does not hurt investment performance is selling. The highest rates of return I've ever achieved were in the 1950s. I killed the Dow. You ought to see the numbers. But I was investing peanuts then. It's a huge structural advantage not to have a lot of money. I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that."

"The universe I can't play in [i.e., small companies] has become more attractive than the universe I can play in [that of large companies]. I have to look for elephants. It may be that the elephants are not as attractive as the mosquitoes. But that is the universe I must live in."

http://www.businessweek.com/1999/99_27/b3636006.htm

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"Small companies" is all he says. No mention of what size market cap he means by that ($2B may be small to him), or pink sheets or bb stocks.

All of that stuff comes from a Morningstar article:

http://morningstar.scotiabank.com/globalhome/industry/news.asp?articleid=MStarUS31390_2005-04-13_08-...

I don't know if Buffett dabbles in the pink sheets as the morningstar author stated, but if he does, it's probably to buy larger foreign companies that don't want to pay big US listing fees and go through the hassle of US accounting rules in addition to the ones in their own country. (I think guys like Nestle, Toyota, etc, were once on the pinks and may still be.) Otherwise the article would contradict itself. It would essentially be saying Buffett can't invest in smaller companies because of his size, yet he's buying smaller companies on the pink sheets.

An example of how one word can have a huge change. Whoever spliced together this internet piece changed the word "my" to "his." Namely, the morningstar author references another piece on the pink sheets by another morningstar author,

"as my colleague Curt Morrison pointed out in a recent article"

but the internet spliced bulletin board article makes it sounds like Morrison is a colleague of Buffett's:

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(talking about Buffett)

"His message to small investors is direct:

If you want to achieve "truly market-crushing returns": Concentrate your research on the universe of small-capitalization stocks. As his colleague Curt Morrison pointed out in a recent article, illiquid stocks have outperformed liquid stocks by 2.1% annually over the past 40 years. That is one hugely compounding advantage to have that can accelerate turning thousands into Millions. These results, of course, make perfect sense. For various reasons, large investors cannot invest in small, illiquid stocks, and with fewer smart people looking at a stock, there is a greater chance of (discounted) mispricings. He continued: "In my experience, the smallest and most illiquid stocks tend to trade on the pink sheets". It may surprise you, then, that Warren Buffett has been known to shop in the pink sheets.

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So what we have here is a complete twisting of something Buffett never said in the first place. It was Morningstar guys who made mention of the pink sheet stuff and then somebody twisted those words even further to make it sound like Buffett and his colleague are talking about tiny pink sheet stocks.

This really looks like it was spliced together by someone with an agenda.

I'm not making a statement for or against the validity of microcap pink sheet stocks. I obviously happen to believe in microcaps. I'm simply pointing out that Buffett didn't say that stuff and I hate to see someone's good name used to further another person's agenda.