Market Crash? Wait that sounds a little familiar....

The recent tumble in the stock markets brings me to reflect on one of Buffett's key tenets:Stay rational in an irrational world.Buffett has always viewed buying stocks as owning a stake in a business.So what does Buffett mean by that? Well, taking a quote from the '97 Berkshire Annual Shareholder letter, Buffett describes this aptly

"Selling fine businesses on "scary" news is usually a bad decision. (Robert Woodruff, the business genius who built Coca-Cola over many decades and who owned a huge position in the company, was once asked when it might be a good time to sell Coke stock. Woodruff had a simple answer: "I don't know. I've never sold any.)"

Now when the market is bearish,Buffett always never fails to remind us that opportunities lie ahead.In a recent interview on CNBC (Aug 15 2007), Buffett says this

"Generally speaking, when there's a certain amount of chaos in certain sections, it is unpredictable where the fallout will be, but the fallout offers some real opportunity"

In reality, to be a successful investor, one just needs to be a little patient and wait for the right time to buy pieces of fine businesses ; especially when everyone is panic selling and selling off their portfolios.For example, despite strong earnings growth in the credit card business,American Express stock is down from a 3 month high of $66 USD to about 57$ USD.Obviously, the concerns over the subprime mortgage market has hit financial stocks hard but this is irrational considering that American Express has little exposure to the subprime mortgage lending market.Now, buying a stake in a company with strong management and wide moat at a discounted price.... that sounds like a home run to me.

Cheers,
Manpreet