Another Piece of Buffettology

This is a summary of the Buffett like thinking which led to my enthusiasm over Drax. For clarity I've written this as a separate post although it underpins my approach to Drax.

In short, my view is that most investors place too much reliance on their ability to forecast and by increasing the perceived, and misplaced future certainty this leads them to place a higher value on the business concerned. But in times of great uncertainty the rug is firmly pulled from under the feet of such investors and pricing becomes very difficult inevitably leading to undervaluation. The trick therefore is to accept the short term uncertainty which is always there, just not recognised and focus instead on the longer term looking for reliability of outcome through sustainable competitive advantage plus value to shareholders via return on capital. Probably no one will fully understand what I am trying to say here since it turns traditional short term thinking on its head.

Postscript: Just came across these words of John Maynard Keynes; "An investor who proposes to ignore near-term market fluctuations needs greater resources for safety". For that reason I never use leverage nor trade on margin.