Racing’s speed and class also work with stock markets

My pals in SA’s horse racing industry are excited about the long-overdue ending of a ban on thoroughbred exports. They have spent decades overcoming politics and vested interests, but a breakthrough is nigh. Much needed good news for an industry trying to recover from damage wrought by one MJ Jooste, Champion Owner since 2008.

Those with an affinity for racing are in good company. Apart from thoroughbred-besotted Queen Elizabeth, there’s also Berkshire Hathaway’s chairman Warren Buffett who likes using racing parlance to explain investing. A throwback to his boyhood, when Buffett published a tipsheet called Stableboy Selections sold to those attending Omaha’s Ak-Sar-Ben racetrack.

Interviewed by the New York Times magazine back in 1990, Buffett explained: “The speed handicapper says you try figure out how fast a horse can run. A class handicapper says a $10,000 horse will beat a $6,000 horse. Ben Graham said ‘Buy any stock cheap enough and it will work’. That was the speed handicapper.”

He added: “Other people said ‘Buy the best company and it will work’. That’s class handicapping.” When buying shares, Buffett began as a speed handicapper and progressed to class handicapping. A route most investors tend to follow. Because over the long-term, when becoming a part-owner of a company, those with quality tend to prevail.

*We’ll be talking investing again today at 12:30 (SA time) when I host the monthly webinar updating the Biznews Share portfolio. Attendance is free to Biznews Premium members but you do need to register beforehand. Do so by clicking here.

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