This past weekend I was reminded of the time I pulled a quick one on my parents. The movie, The Ten Commandments, was on television and I knew my parents would let me stay up way past my bedtime to watch the educational and religious film. It worked perfectly, but I certainly had no interest in a Charlton Heston movie.
Fast forward a bunch of years, and I believe one scene has come back as a great teaching lesson.
Buffett has become a religion, and his words are taken as the Ten Commandments brought down by Moses (or Heston) from on high. They are not to be violated or ignored. BUT–Buffett is the biggest violator.
Take yesterday’s announcement that he was buying an 8.7% stake in Axtalta Coating Systems. Axtalta was a recent IPO in November of 2014 at $19.50, yet Buffett paid around $28 per share. I know I have read that Buffett doesn’t do IPOs. Yet, this purchase was not only at a higher price, but the stake he bought was directly from Carlyle, a private equity company. You read that right, Buffett bought a secondary offering from a private equity group at a premium to an IPO price. The horror….
Cue the scene where Heston smashes the tablets to the ground after he comes down from Mt Sinai.
I could fill a book with examples of Buffett saying one thing and doing another. Does this make him a hypocrite? I don’t think so, but I am a delusional fanboy….
What it means is that exceptions are going to happen. And in the investment world, sometimes the best opportunities are found in the exceptions. But you can only know if they are good investments if you understand the principles underlying those rules first. Buffett knows those, and that’s what he preaches, but he is more than willing to smash the tablets when a great opportunity comes along.