The recent news that investment legend Warren Buffett will give away his billions to charity should come as no surprise. He must have thrown up his hands in exasperation at the contrariness of the stock market.
The market is a crazed animal -- especially when it comes to the auto industry.
Just consider the top-performing companies in the auto and supplier segments of the second quarter's Automotive News/PriceWaterhouseCoopers Total Shareholder Return Index.
Earlier this year, General Motors looked to all the world like it was headed for bankruptcy. It reported losses of $10.6 billion for 2005. Critics spent the winter and spring punching away at what they called its dubious management strategies, ho-hum products and seemingly hopeless outlook.
Had you disregarded all of the above and, in a wild-eyed gambler's roll of the dice, plowed money into GM's stock on March 31, you would have enjoyed a stunning 41.4 percent return on investment in just 90 days. Those were the same 90 days when pundits were clucking their tongues in pity at billionaire Kirk Kerkorian for his questionable investment in GM.
Perhaps instead, pity the poor investors of Toyota Motor Corp.
During the same period, Toyota was racking up sales in the U.S. market at a pace that surprised even Toyota. In the last 30 days of the quarter, Toyota won a 15 percent market share here. Its expansions around the globe are positioning Toyota to rapidly overtake GM as the world's biggest automaker.
Had you jumped onto the Toyota bandwagon and plunged your retirement fund into Toyota's stock on March 31, you would have woken up poorer on July 1. Toyota shares were down 3.8 percent in that period.
Or take Delphi Corp.
Since October, Delphi has been sloughing through Chapter 11 reorganization. Management's plans to right the ship involve almost a complete dismantling of the company's mission statement, resulting in the elimination of a large percentage of its work force and the shuttering of a large part of its North American manufacturing base.
Hardly the sort of company that prudent old Warren Buffet would have invested in.
Had you gotten hold of all the Delphi stock you could have afforded on March 31, you would have doubled your money in time for July 4th. Delphi delivered a 167.7 percent return on investment, even as creditors fretted publicly that the company might not be able to pay them off.
And, by contrast, where is Aisin Seiki Co., the Japanese supplier of chassis, transmission and engine parts to Toyota? The company increased global sales more than 15.5 percent last year, a boost of $2.40 billion. It is building business with new customers, including GM.
Buying into Aisin Seiki would have been the dumbest move possible for a supplier-industry investor in the second quarter.
Shareholders were punished with a 23.4 percent decline in their holdings for the period, even as the company prepared for additional North American business.
Warren Buffett, the master, has a name for investors who aren't serious enough to see through the superficial and temporary issues of companies to recognize real value. He calls them "blockheads."
He equates short-term investment views with people on the prowl for romantic one-night stands.
"I never attempt to make money on the stock market," he once said.
"I buy on the assumption that they could close the market the next day and not reopen it for five years."
"Our favorite holding period," he also quipped, "is forever."
You may e-mail Lindsay Chappell at [email protected]