The Warren Buffett Philosophy of Investment: How a Comb… (2024)

Good book on Buffett's changing investment philosophy. It is not 100% complimentary, which is good.

Buffett has been looking to buy businesses with high sustainable Return on Equity. Not always successfully as in many cases his investments lost this "indestructible" moat and value.

A lot of the companies Buffett bought were private family businesses, whose owners were looking to sell their businesses to good hands. And Buffett with his pay-cash, hands-off, never-sell approach appeals to them, and able to buy the companies cheaper than purely financial or strategic investors.

Another factor of success is the structure of the Berkshire Hathaway as a company not a fund. The BH as an insurance company has no on-demand liabilities. Buffett does not have investors who can demand their investment back. This allows Buffett to take a very long term view, invest in illiquid private companies and never sell. The insurance float has proven to be a cheap leverage tool for his investments.

Buffett does not believe it diversification. Diversification is for ignorant, he says. Those who know what they are doing are fine with concentrated portfolios (GEICO was 35% of his portfolio at some time in the early career).

My view: These factors now actually play against WB:
1. With the fund is larger and larger, it is more diversified and less concentrated, which means its returns are less likely to be very different from the market.
2. Never sell approach means that the fund has many old investments with returns on equity mean-reverting, and/or their valuations already fair.
3. WB is getting older, which means his appeal for family business owners may be weaker. Plus for a large investment vehicle such as BH it is very difficult to find bsnowners in size and quantity.
4. Market has become more efficient over years. Now there are more Graham and Dodd followers around who hunt for similar deals.

This is mostly why WB lowered his required annual return from 15% to 10%.

Still WB has some powder:
1. His investment approach seems sound and working. He has immense knowledge of the corporate america
2. His long term view with cheap float financing help the returns.
3. Now he is a well known investor with fine reputation and cash and able to make deals in distressful situations.

Awesome overview of Buffet's investment philosophy

This book really changed how I think about investments. I recommend it to all my friends. I'd suggest three improvements to the book: 1, put all footnotes and references to the back. This shouldn't read like an academic paper; 2, talk more about how retail investors can apply those principles; 3, add more anecdotes and pictures to make it less boring.

At the beginning, it gives a lot of new knowledge about common stock

เป็นการนำสิ่งต่าง ๆ ที่ Buffett เคยทำมาวิเคราะห์หลักการและรายละเอียดต่าง ๆ สรุปออกมาเป็นลักษณะการลงทุนของ Buffett และหลักการในการเลือกบริษัทที่จะทำการลงทุนหรือเข้าซื้อกิจการ

I enjoyed the book, and it was an easy read, but it did not provide any real new insights. Lots of quotes from other books on Buffett - but I've already read those.

I did glean a couple of "reminders" on share options and management that will be useful for me in my own analysis and management. For me, this was largely entertaining reading.

Useful contribution to the crowded market of books on Warren Buffett.