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We’ve all heard of Ben Graham’s Mr Market, a fable kept pre-eminent in Warren Buffett’s mind ever since he learnt it by reading The Intelligent Investor in 1949. Buffett gave a twist to the fable in his Mr Farmer story told at Berkshire Hathaway’s virtual AGM a few days ago.
Buying a small part of a business, not counters in a game of speculation
“We’ve always looked at stocks as being part of a business. People bring the attitude toward them too often that, because they are liquid and quoted, that its important to develop an opinion on them minute by minute.
That’s really foolish when you think about it. That’s something Graham taught me in 1949: that single thought that stocks were parts of businesses and not just little things that moved around – charts were popular in those days.”
Buying a farm with a peculiar neighbour
“Imagine that you’d decided to invest money now, and that you bought a farm; say 160 acres at X per acre. And this farmer next to you bought 160 acres of identical quality.
And this farmer was a very peculiar character because every day that farmer, with the identical farm, says ‘I’ll sell you my farm, or I’ll buy your farm, at a certain price”, which he would name.
Now, that’s a very obliging neighbour. That’s gotta be a plus to have a fellow like that on the next farm.”
Shares are different
“You don’t get that with farms; you do get it with stocks. If you own 100 shares of General Motors on Monday morning someone will buy your 100 shares or sell you another 100 shares at exactly the same price. And that goes on five days a week.”
Intrinsic value
“When you bought the farm you looked at what the farm will produce – that is what went through your mind.
You say to yourself, I’m paying X dollars per acre and I’ll get so-many bushels of c
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