What do Warren Buffet, Paul Graham and Hugh Hefner have in common? Each buys an undervalued asset at its undervalued price, sprinkles it with some fairy dust and then sells it at a premium once the potential has been realized. One does it with stocks and securities, the next with startup founders and their ideas, and the last with women.
I am no Buffet expert but know he is a value investor and buying distressed assets has been a way for him to obtain value. He likes to keep existing management.
Yeah, you've got the flavour right.. although... he tends to not buy distressed assets so much as assets that the market thinks are distressed.... a solid business (i.e. non-distressed) is very important to him. Maybe I'm just playing with definitions, but here's an example:
American Express was guilty of fraud, and things looked really bad for them, because their business is based on trust - surely their future bleak, thought Wall St. Their stock price tanked (this is just the opinion of the market; it may or may not correspond to reality). But Warren Buffett went down to the supermarket, and observed people: in fact, they still trusted American Express, in the operational sense that they still used it. The fraud didn't affect Amex's business at all.
So he put half his wealth (or something like that) into it, and made a killing... by buying a non-distressed asset at a distressed price.
Hef just uses photoshop and his bed. Graham gives everyone a good lunch and some networking support. Buffet just gets the most alert people to brighten up and prod the execs in despair.
