Monday, 29 June 2015

Value Creation Investments

When Warren Buffett bought Nebraska Furniture Mart (NMF) from Rose Blumkin it was done on a handshake. No inventory check or auditing due diligence. The Blumkin motto of "sell cheap and tell truth" must have been instructive in allowing for Buffett's decision to buy NFM. But this Buffett buy like others would have come to his attention because of a perceived value.

In the Intelligent Investor by Benjamin Graham, he made mention of the intrinsic value of a company and I suspect that Warren Buffett saw where he could enable NFM to create greater value in the future despite any risk posed by the furniture market.

My thoughts are that a simple analysis went into the Buffett buy decision that is:

  1. the USA population will continue to grow into the future
  2. people will need household furniture when they move out of their parent's house
  3. the buyers will buy from the cheapest price place no matter where that value lies.
Nobody sells as well as Rose Blumkin's NFM did.

What I have learnt from value creation investment is that; they are formed around simple steadfast concept executed over long period of time without a wavering strategy.

Most great companies lead off with a strong motto and they stick to it for many years into the future;
  • Just Do It
  • Coke It Is
  • Bigger Better Network
  • 15 minutes could save you 15% off or more
  • Safe and Cheap
  • Buy and Hold.
What is your motto?

What are you creating your value around?

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