This weekend’s Wall Street Journal has a readable piece on what Warren Buffett didn’t invest in during the financial and economic crisis (“In Year of Living Dangerously, Buffett Looked ‘Into the Abyss'”) … Bear Stearns, Lehman Brothers, AIG, Wachovia, Freddie Mac and others.
Besides making the point that deciding not to invest can be as important to a portfolio manager as pulling the trigger to buy, the story contains this nugget of side interest to those of us who labor in investor relations:
That night, in his offices in Omaha, Neb., Mr. Buffett pored over Lehman’s annual financial report. On the cover, he jotted down the numbers of pages where he found troubling information. When he was done, the cover was dotted with numbers. He didn’t bite. Six months later, Lehman filed for bankruptcy protection.
So Buffett reads annual reports. Oh, I know, he’s a seventy-something sage, and many of us get most of our information online or on our phones. But Buffett is an investor with influence over market-moving sums of money. And apparently he digs into financial reports, marks them up and then makes his decisions.
Not that a nice annual report would have saved Lehman or AIG. But in the normal course of investing, quality of disclosure and clarity of explanation do matter.