Abstract: Laurent LaBrie explains how his investment technique compares with Warren Buffett's. Earn more by choosing a global growth company as an investment in your portfolio. There are winning stocks in the NYSE stock market if you buy and sell at the right price.

Laurent J. LaBrie, management and financial consultant

Who is he?


Bio (basically the same, just more personal detail)



How can he benefit me as a financial advisor?

What is his perspective on investing?

Investment portfolios (.pdf format - Adobe Acrobat necessary to read)

How we are swimming in a sinking US dollar.

His stock picks and pans.

What articles has he published on management?

Investigating problems in the workplace (.pdf format)

Mentoring, correcting, and disciplining employees

An inside look at a peer evaluation system

Examples of Websites created, maintained, and promoted:

Romania's #1 site about HIV
Romania's #1 site about HIV
(Logo by LJ LaBrie)

Global Assistance
for Medical Equipment, Kosovo
Global Assistance for Medical Equipment, Kosovo (Logo by LJ LaBrie)

Romania's #3 site in its market segmentRomania's #3 site in its market segment (Logo by LJ LaBrie)

navigator for the writings of Laurent J. LaBrie

How my investment techniques compare to those of Warren Buffett, Part 2
by Laurent J. LaBrie, MSBA, MSBME
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Apologies to the expert


Going against the flow

The company

Staying with the well established

My technique is to invest in well established companies, not in IPOs (Initial Public Offerings). You can often make a lot of money in the first few days but rarely does the stock continue that way. The company is not running a charity and wants to make the most money for the company, not for the investor. This usually manifests itself in two phenomena, 1. The company CEO usually times the IPO for the moment that their company is the most profitable. 2. The CEO polishes up and publicizes the company and seeks the best price that they can. The good news is at its best and already accounted for in the price. As Warren Buffett writes, "Managements that say or imply during a public offering that their stock is undervalued are usually being economical with the truth or uneconomical with their existing shareholders' money: Owners [stockholders] unfairly lose if their managers deliberately sell assets for 80 cents that in fact are worth $1." p. 33

I seek value and growth

I agree with him that companies can be both growth and value, i.e. "growth at a reasonable price." For over a decade, I've been using a proprietary computer program that calculates value based on net worth, earnings power, and growth. Stocks below this calculated value are then evaluated further. This contrasts with John Burr Williams equation for value in his book The Theory of Investment Value. His idea, as Buffett condenses it, was "that the value of any stock, bond or business today is determined by the cash inflows and outflows--discounted at an appropriate interest rate--that can be expected to occur during the remaining life of the asset."

Perhaps I don't understand it or am fuzzy in my thinking, but I think that earnings is more important than cash flow at valuing an investment. If one person earns $100,000 and spends $90,000 in rich living, I don't think he is ten times better off than someone who earns $10,000 and doesn't spend a thing. The first person may have greater potential if one can get him off his spending habit, but that may prove more challenging than getting the second person to find a better job. Buffett may do this in practice, as he writes, "Put together a portfolio of companies who aggregate earnings march upward over the years, and so also will the portfolio's market value." p. 94.

And these earnings that concern us are the unmanipulated ones, not the often used "earnings before depreciation, interest, and taxes (EBDIT)." If you don't have a line in your budget for auto depreciation, you will soon find yourself without wheels. Consider EBDIT and you will be without a factory or office.

Share buy-backs are positive indicators~~sometimes

I look for companies that are adding to company value by buying back undervalued stock.

"In the 1980s and early 1990s, share buy-backs were uncommon and Buffett credited managers who recognized that the purchase of a share priced at $1 but with a value of $2 would rarely be inferior to any other use of corporate funds. Alas, as often happens, the imitators stepped in and now you frequently see companies paying $2 to buy back shares worth $1. These value-destroying share repurchases often are intended to prop up a sagging share price or to offset the simultaneous issuing of stock under stock options exercised at much lower prices." p. 15-16

Indeed, you often have companies buying back stock while insiders are selling. This is rather extreme self-service. Why would a director have his company buying shares while he is selling? If one is doing it, the case can be made that he just wants to diversify his portfolio, but when many are doing it in mass, it looks rather odd that the company should want those shares. It is likely to be a proping up of the stock while the insiders get out from under it. It is likely to spell problems in the future, and I normally would not buy into such a situation.

Other factors

  • I am not a day-trader as I think that is speculating or gambling, not owning companies and financing growth. "If you aren't willing to own a stock for ten years, don't even think about owning it for ten minutes." Buffett p. 94.
  • In contrast with what I understand of Buffett, I tend to avoid companies that create a lot of "goodwill" through fancy accounting tactics, although he agrees that "goodwill amortization charges are usually spurious." p. 210
  • I like management which attacks costs as vigorously when profits are at record levels as when they are under pressure.
  • I like companies which stick with what they understand and let their abilities, not their egos, determine what they attempt. As Thomas J. Watson Sr, of IBM said, "I'm no genius. I'm smart in spots--but I stay around those spots."
  • Although I hope to in the future, I presently don't usually hold for years on end. If you spread my investment reputation around and get your family and friends involved, I will have the opportunity to manage a lot of money. Then I will have a chance to know all the leaders of a company intimately and take over entire companies like Warren Buffett does. Then you and I will be able to keep semi-permanent positions, lead companies, and allocate resources efficiently as he does.

The price

I agree with Ben Graham's idea that "In the short run, the market is like a voting machine but in the long run it is like a weighing machine." p. 65. I try to buy a heavy company that is unpopular at the polls, and sell popular companies that are losing weight. Sometimes, I will sell a security before it is overvalued because I find a better bargain.

I further agree with his statement, "Consciously paying more for a stock than its calculated value--In the hope that it can soon be sold for a still-higher price--should be labeled speculation (which is neither illegal, immoral nor--in our view--financially fattening)." p. 86 Until the price rises, you are relying on a ponzi scheme of hoping between now and then that you will keep finding more buyers that are less intelligent than are the sellers.

Keep in mind that these people are hoping to act like the man with an ailing horse. Visiting the vet, he said: 'Can you help me? Sometimes my horse walks just fine and sometimes he limps." The vet's reply was pointed: "No problem--when he's walking fine, sell him." We want to buy thoroughbreds, not a horse that may someday walk like Secretariat.

Conclusion and charge

Professionals will try to tell you the market is no place for the small fry like us. We disagree and have shown for 30 years that this is the perfect place for David to beat Goliath. As opposed to in the Bible, on Wall Street, Goliaths are always getting beaten by Davids but there are too many Davids for the media to cover, so they choose the Goliaths like Enron, WorldCom, etc. The problem is that when an individual manages his portfolio, he is too emotionally engaged like the others in the game. If you buy when everyone else is buying, the price will be high. If you are emotionally detached from your portfolio by having someone else manage it for you, you will do much better. "A recent study by researchers at Carnegie Mellon, Stanford and the University of Iowa found that people with stroke- or disease-induced damage to the emotional areas of the brain outperformed those with undamaged brains in an investment game, because emotions didn't get in the way of their market calls." (Fortune "A meditation on risk" October 3, 2005 p. 50)

We engineers probably have some brain damage that makes us want to computerize everything. If you have the stomach to go against the current and stand against the crowd, can risk being at parties at the peak of the dot-com boom and getting laughed at for not having any Internet stocks, then please contact me at the address below.

Laurent J. LaBrie, MSBA, MSBME

Write me at e-mail address if you would like to discuss my managing your portfolio. Minimum $100,000.

e-mail: e-mail address Y!messenger ID: laurent_labrie

"A good manager is a man who isn't worried about his own career but rather the careers of those who work for him... Don't worry about yourself! Take care of those who work for you and you'll float to greatness on their achievements."---HSM Burns Copyright 2004-2010

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