Warren Buffett on investing in China (1 of 12)

This is the first in a series of twelve posts. The introduction to the series is here.

By way of review, these are my notes of Warren Buffett’s responses to questions from Notre Dame and Stanford MBAs on October 9. 2007.

What are your thoughts on investing in China?

If you don’t have a high degree of confidence, just leave it alone. Not buying stocks in China at this time.

The 1790 population of China = the US population now.

I only want things I am certain of.

Know when you are in your circle of competence and when you are outside of it.

Ted Williams — it’s all about waiting for the right pitch.

PetroChina at 33% of book — swing. At 80% of book — wait.

H-shares vs. A-shares — mainland Chinese paying 2.5x as much for PetroChina as HK and US investors.

How he got into the PetroChina investment:

reading Annual Reports in 2003, saw a firm that promised to pay out 45% of earnings as dividends (earnings looked to be worth at least 80–100 billion) then looked up price — found it was 35 billion. Sold investment at 275 billion, it later went to 400 billion.

Yukos was similarly huge, but I’d rather be in China than Russia. Ate breakfast with the Yukos CEO 4 months before he went to prison.

Comparing yourself to your idiot neighbor who is getting rich drives momentum and bubbles.

I would never buy based on momentum.

Buy based on how businesses behave, not how people behave.

It’s like Cinderella. The ball is fun, you know it ends at midnight, but there are no clocks on the wall.

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