the essays of warren buffet reviews
1. Corporate Governance
2. Corporate Finance and Investing
3. Alternatives to Common Stock
4. Common Stock
5. Mergers and Acquisitions
6. Accounting and Valuation
7. Accounting Policy and Tax Matters
In the prologue section, Warren explains that the Berkshire Hathaway shareholders group are contacted directly by him or as he puts it “the fellow you are paying to make sure business is running”. He clearly demonstrates how positive energy and dedication combined with his natural leadership skills and management principles gets you what you want, where you want and when you want it. He explains in great detail what he has learnt over the years and with a great sense of humor includes tons of personal experiences and observations about the American investment market, its culture and economy and the most notable ups and downs of the last 25 to 30 years.
“We will never make purchases with the intention of stemming a decline in Berkshire’s price. Charlie and I favour repurchases when two conditions are met: first, a company has ample funds to take care of the operational and liquidity needs of its business; second, its stock is selling at a material discount to the company’s intrinsic business value, conservatively calculated. We have witnessed at a material discount to the company’s intrinsic business value, conservatively calculated. Today, IBM has 1.16 billion shares outstanding, of which we own about 63.9 million or 5.5%. Naturally, what happens to the company’s earnings over the next five years is of enormous importance to us. Beyond that, the company will likely spend $50 billion or so in those years to repurchase shares. Our quiz for the day: What should a long-term billion shares outstanding, of which we own about 63.9 million or 5.5%. Naturally, what happens to the company’s earnings over the next five years is of enormous importance to us. Beyond that, the company will likely spend $50 billion or so in those years to repurchase shares. Our quiz for the day: What should a long-term shareholder, such as Berkshire, cheer for during that period? I won’t keep you in suspense. We should wish for IBM’s stock price to languish throughout the five years. Let’s do the math. If IBM’s stock price averages, say, $200 during the period, the company will acquire 250 million shares for its $50 billion. There would consequently be 910 million shares outstanding, and we would own about 7% of the company. If the stock conversely sells for an average of $300 during the five-year period, IBM will acquire only 167 million shares. That would leave about 990 million shares outstanding after five years, of which we would own 6.5%.
Why Buffet hates to part with Berkshire stock
Nevertheless, these are hardly reasons for avoiding this collection. On the simple fact alone of saving much time, energy, and effort, readers should snatch up this volume with alacrity. It’s different than the scores of other Buffett-related books that attempt to summarize his wisdom, but dreadfully overreach; there’s little summary here. Cunningham is the underrated messenger for someone whose message definitely needs to be heard.
The book, which is structured thematically, underscores the owner-related business principles that lie at the heart of Buffett’s teachings. These encompass a wide array of topics, including corporate governance, accounting, and investing, among others. Each chapter of the book explores these essays in-depth; and while Cunningham’s own insights are practically non-existent (for rather obvious reasons), his overall contribution to our understanding of Buffett’s investment success should not be underestimated.
4. Buy a stake in the company as if you own a business:
– first, try to assess the long-term economic characteristics of each business; second, assess the quality of the people in charge of running it; and, third, try to buy into a few of the best operations at a sensible price.
– If at first you do succeed, quit trying.
– Our goal is to find an outstanding business at a sensible price, not a mediocre business at a bargain price.
– The best business to own is one that over an extended period can employ large amounts of incremental capital at very high rates of return.
– First, we try to stick to businesses we believe we understand.
– Second, and equally important, we insist on a margin of safety in our purchase price. If we calculate the value of a common stock to be only slightly higher than its price, we’re not interested in buying.
– You simply want to acquire, at a sensible price, a business with excellent economics and able, honest management. Thereafter, you need only monitor whether these qualities are being preserved.
– Our reaction to a fermenting industry (a new initiative which we don’t understand fully) is much like our attitude toward space exploration: We applaud the endeavor but prefer to skip the ride.
– You can, of course, pay too much for even the best of businesses.
– You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.
– Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily-understandable business whose earnings are virtually certain to be materially higher five, ten and twenty years from now.
– If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes. Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also will the portfolio’s market value.
– It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
– Lethargy bordering on sloth remains the cornerstone of our investment style
– In investing, just as in baseball, to put runs on the scoreboard one must watch the playing field, not the scoreboard.
The essays talked about various things. Here I put some of the most sali I started with this book with a sort of apprehension. I don’t have much domain knowledge in Finance and thought how I will be able to understand the jargon. One read later I can say that I already understand some of the things a little bit better. Although I skimmed some part of the essays because they didn’t make much sense to me right as of now, I feel I will definitely be coming back to this book to read in its entirety.
It goes without saying that Warren Buffett is the greatest investor of all-time. I’m fascinated by his life and his thoughts on investing, so I was looking forward to reading this book. Buffett serves as the chairman and chief executive of Berkshire Hathaway, an American multinational conglomerate holding company which owns the likes of GEICO, See’s Candies, Duracell, Dairy Queen, among others. The company also holds significant minority shares of American Express, Wells Fargo, Coca-Cola, and Bank of America.
- high costs (investment fees, etc)
- portfolio decisions made on tips/fads, rather than basic principles
- a start-and-stop approach to the market marked by untimely exits and entries.