Horse-picking the Warren Buffett way....

Last Updated: 10.04.2019

Wednesday, 10th April 2019

Horse-picking the Warren Buffett way….

Readers tend to assume that Nick Pullen (that is my real name) is an out-and-out racing nut....

Nick Pullen leaps out of bed in a morning, settles himself in front of Racing UK and eats the formbook for breakfast....

The remainder of the day passes in a blur of races and stats and form cards and prices. It’s racing, racing, racing from one end of the clock to the other....

Of course, I do spend a lot more time following and studying the racing than the average man. Obviously. It’s inevitable – the racing game is not only my focus as a punter but also my beat as a writer....

But no man is entirely one-dimensional. There is more to Nick Pullen than the racing. There are other things that interest me – things I work on and invest time into....

  • Areas of interest....

Plants, for example. I wouldn’t go so far as to refer to myself as a horticulturist. But I am certainly an enthusiastic amateur....

I enjoy the garden. I enjoy growing things. I enjoy looking after them. The garden is a big part of life....

Right now, we’re enjoying daffodils and waiting on what comes next....

Cryptic crosswords are another passion. Not a day goes by without me taking aim at the Daily Telegraph puzzle. I find it a good way to switch off for an hour....

I’m also a keen reader – a voracious reader – of news and books....

There are various subjects that are of strong interest for me. One is the financial world. I’m fascinated by the markets, how they move and the people who play in them....

Now, there’s not a lot of crossover between the price of copper and the racing. Or the current state of the Venezuelan economy and what will win the Spring Cup on Saturday afternoon....

But occasionally there is some crossover. One thing can inform the other. That’s the case this week with Warren Buffet....

  • Work without price....

For those of you who don’t know, Warren Buffett is the octogenarian chairman and CEO of Berkshire Hathaway, an American multinational conglomerate holding company that manages vast amounts of investment capital....

Buffett – along with his team – allocates that money. And he’s done very well. He’s considered one of the most successful investors in the world. He’s beaten the market for year upon year and made billions as a result....

People are always interested in what he has to say. They like to know where he’s putting his money. And investors are always keen to learn more about his objectives, his strategies and his methods....

He was talking to journalists about the way he works earlier this week and one part of what he said resonated with me – because I work the same way when dealing with horse races....

Buffett said that when he’s analysing a company with a view to buying its stock, he does so without making any reference to the current share price. He said this....

‘I always like to look at investments without knowing the price – because if you see the price, it automatically has some influence on you.’

I work the same way when I’m looking at a big race....

  • Opinions, opinions....

Prices are basically a numerical expression of opinion....

They might start-out as the best-guess of some guy on a racing desk in a bookmaker’s trading room – the market must be made somewhere....

But weight of money will soon suggest the adjustments that should be made....

What you end up with are prices that reflect consensus opinion – with a profit margin built in, of course. The bookie and his spawn must eat too....

The prices tell you what everybody thinks – at any given point in time. They fluctuate based on new information – be that fresh opinions coming to market or events that change existing opinions....

For some punters, the prices are the first port of call. That’s where they go for their immediate steer....

But I avoid the prices until I’ve completed my analysis. The prices are about the last thing I look at....

  • Relying solely on my own appraisal....

The key thing for me in my approach to betting horse races is a key thing for Buffett when he’s making investments....

I want my conclusions about a race and the horses contesting it to be based on my own independent appraisal of the information available....

I don’t want to be distracted or influenced by the opinions of others....

So, the last thing that I want to look at ahead of forming my own view are the prices....

Why would I want to know what everybody else thinks ahead of figuring out what it is I think myself?

Knowing what others think or believe before you start work can’t do anything but influence you – even if it’s only subconsciously....

Look at the prices ahead of doing your analysis and you’re already looking to prove or disprove the theories of others before you’ve even started. You’re already measuring one thing (what you see) against another (what the market thinks).

It doesn’t make any sense. Not to me....

  • Leave prices alone until the last moment....

For me, the best way of doing my value-seeking job is to keep the prices and the opinions of others out of it until the last moment....

The last moment is when I’ve completed an honest and independent analysis of my own, come to what I hope is an informed judgment and am best-placed to take a view on where I think everybody else has gone wrong....

For me, avoiding the prices until the last moment is the cleanest route to a genuine against-the-crowd bet....

It’s an unadulterated approach. There’s little risk of contamination. My process is never infected with the opinions of others....

In short, it’s my own work. My own thinking. If I get it wrong, I only have myself to blame....

It can be a lonely old place but relying solely and purely on my own assessments and my own independent judgments is my best weapon against the market. It’s my best shot at obtaining genuine value....

At least that’s the way I see it. Not everybody would agree. But I think Warren Buffett would see where I’m coming from....

  • The last word….

That’s all from me for today....

I’ll be back on Friday with my contrarian take on the weekend action at Ayr & Newbury... .

Until then. Stay tuned.

Nick Pullen

Against the Crowd