[FOUNTAIN]Egg money"Don't put all your eggs in one basket."
That is the gist of a theory that brought James Tobin, a Yale University professor who died two weeks ago, a Nobel prize in economics in 1981.
But in real market terms, Mr. Tobin's theory is not the only viable option. There is also a countering investment theory that boils down to: "Put all your eggs in one basket. But watch those eggs carefully."
That is the investment principle of Warren E. Buffett, chairman of Berkshire Hathaway Inc. Mr. Buffett is considered the world's greatest investor.
The second wealthiest man in the world, following Bill Gates, Mr. Buffett has assets worth $35 billion but still lives in the humble house he bought four decades ago for about $30,000 in his hometown of Omaha, Nebraska. He is called the "Oracle of Omaha" for his ability to read through market movements by sitting in his home 2,000 kilometers from Wall Street.
Mr. Buffett's investment philosophy is very simple: Price and value usually do not coincide with each other in the market. For example, if Korea's blue chip Samsung Electronics' stock price is quoted at 300,000 won ($225), its actual corporate value can be higher or lower than the stock price. Therefore, the best investment strategy is to select undervalued stocks or corporations and concentrate on them.
Warren Buffett lives his philosophy. He has most of his $35 billion in his stake of Berkshire Hathaway, which is about 31 percent of the investment company. He has good reasons to do this. In 1965, when Mr. Buffett was the chief executive of the firm, Berkshire's common stock was priced at around $12 per share. The stock price has jumped more than 20 percent every year since, and it hit $73,000 per share last week. Berkshire, a holding company that manages subsidiaries including insurance firms, has never paid investors dividends or stock options. Instead, the firm reinvests what it has reaped, thus increasing the value of the company.
Of course, an oracle is not quite a god. Last year, in the aftermath of the Sept. 11 terrorist attacks, Berkshire's stock prices dropped 6 percent.
Mr. Buffett's annual salary last year was a mere $100,000. Even in Korea, where the economic scale is much smaller than that of the United States, it is not uncommon to find chief executives who are paid more than $100,000. Mr. Buffett says there are too many chief executives who are paid enormous salaries or stock options despite bringing losses to their firm's investors.
The writer is a JoongAng Ilbo editorial writer.
by Sohn Byoung-soo