The Warren Buffett Way

Rating:
Summary: Amazed by good reviews of this book
Review: I am continually amazed by the good reviews this book receives; so I finally felt compelled to write. There is nothing in this book that Warren Buffett hasn't already said in his annual letters. Robert Hagstrom revealed his true reason for writing this book when the first paperback edition came out and in it, in fine print, was a notice stating that Hagstrom had started an investment fund designed to invest using Warren Buffett's principles (read: way). That is, he wrote the book so you would learn his name, become confident in his ability to analyze investments like Buffett does, and invest in his fund (which has a hefty expense ratio and has performed quite poorly I understand). So he writes this page book, in which he recommends that if you ever have the chance to read Buffett's annual letters, you should, since they "read like a book on his investment philosophy". I took his suggestion, ordered the back annual letters (sold by Berkshire Hathaway for $15) and found they repeated everything in this book - sometimes word for word (now how could Buffett have known what Hagstrom was going to write?). I get the feeling that Hagstrom has never met Buffett and never discussed investing with him (unlike Lowenstein, Lowe, Train, etc.) and his only research for this book was Buffett's annual letters. I learned more about Buffett's style from Roger Lowenstein's biography. Take Robert Hagstrom's advice and purchase the annual letters; they say the same thing - except Buffett's sense of humor is better.

Rating:
Summary: Too much of a good thing.
Review: The outline of Mr. Buffet's investment philosophy is profoundly worhtwhile reading. Unfortunately, the bulk of the book is concerned with providing examples of seemingly every investment he has made. The principles are discussed ad nauseum without adding any new insight.

If this book was half as long as it is, I would have rated it a 9.

Rating:
Summary: A little dated and A little padded
Review: The Warren Buffet Way is covered on pages 256-268. The remainder of the book is historical examples of companies that Mr. Buffet purchased over the years, with each mapped into the principles that were outlined on those twelve pages. It's a shame Mr. Buffet avoids learning technology, and therefore he's missed the entire technology equity explosion - he could have made his customers and partners a LOT more money.

Rating:
Summary: Track record is the best proof of investment philosophy
Review: I read this book on a plane. Buffet's past record of increasing wealth for his shareholder at 23% a year for a few decades is the best proof of his investment philosophy.I am more than happy to find a that my own investment idea (which was very close to Buffet's) had been proved by him. What kind of effect this book had on me? I became Berkshire Hathway's shareholder soon after reading the book, at a cost of more than $47,000!Bill Yeung

Rating:
Summary: Great Philosophy, Good Read, Average Practical Use
Review: The "Warren Buffet Way" never ventures too far from common sense but whether that makes it ingeniously sound or blandly uninspired will be left for the reader to decide. The techniques Warren Buffet employed to attain success (and wealth) are well documented here with summaries of his investments from early life to recent times (1994). Each investment in analyzed through the lense of Warren Buffets economic principles, a blend of widely recognized economic minds and Warren Buffets own basic philosophy, and the result is an appreciation for his business sense and stock selecting ability.

This hindsight review of his choices is partially intended to teach you, the reader, how to make equally good investments and turn a profit without extensive risk. The problem lies in the fact that Buffet's confident simplicity is hard to obtain. The crux of his theory is calculating the intrinsic value of a company through research that is probably second nature to long-time professional investors like Buffet but is vague or downplayed in the book. Technological methods and industry readings are turned down in favor of a physical appraisal of the company and its management and an unexplained calculation of its potential.

But who has the time or money to visit and interview every possible investment they are considering? And to do so when they are only just starting out with little idea of where to start or what is an important indicator of value and while being told to expect only long-term gains? The book tells you to look past the popular and fickle market at the company itself but it is unclear what to focus on. The idea is good, I'll try to put it to good use in my own investing, but its too general to nail down or check off on a list.

Overall though, it will provide an insightful look at one of the richest men in the world. You'll learn some basic investment strategies and a little history. Its not an economic Bible but it may help beat the crowd without going too far over your head.

Rating:
Summary: Worth the read
Review: Forget B-school, read this book. Seriously, a great introduction to value investing and the Buffett mentality of risk.

Hagstrom's analysis is very easy to read and understand... a book everyone should read.

Rating:
Summary: The Classic Book About Warren Buffett's Investment Way
Review: "The Warren Buffett Way" by Robert G. Hagstrom provides insight into the investment principles used by America's greatest investor, Warren Buffett.

In 1956, Buffett started his first investment partnership with $100. He cashed out after 13 years with $25 million, achieving a compounded rate of investment return of 29.5% for his investors. Today, Buffett's net worth is about $43 billion.

We learn two different schools of investment thought influenced Buffett. Ben Graham taught Buffett to seek value. Philip Fisher and Buffett's investment partner Charlie Munger taught Buffett to seek quality companies with the potential to grow their earnings.

To determine a stock's value, Buffett examines the business behind the stock and evaluates the company's worth by making an estimate of the future cash flows of the company and then discounting these cash flows back to their present value. Buffett only purchases the company if the purchase price is below its discounted value. This provides Buffett a margin of safety.

Hagstrom explains that Buffett uses a focused approach to investing and often only holds a handful of stocks. And, Buffett invests within his "circle of competence" which usually involves traditional companies Buffett understands. Buffett avoids high-tech investments in companies he doesn't understand. Buffett prefers companies he could hold forever. He avoids businesses without a solid track record or businesses lacking honest and competent management.

Quoting Buffett, Hagstrom writes: "In evaluating people, you look for three qualities: integrity, intelligence, and energy. If you don't have the first, the other two will kill you."

"The Warren Buffett Way" shows how Buffett's investment criteria came into play for several major companies he purchased, including GEICO (Berkshire Hathaway, Buffett's company, owns 100% of GEICO), Clayton Homes (mobile homes), The Pampered Chef (kitchenware sold direct at in-house parties), Gillette, and Coca-Cola. The book's appendix lists Berkshire's major stock holdings each year from 1977 to 2003.

Buffett is most likely to purchase entire companies today. Smaller successful investments do little to grow Berkshire Hathaway.

So, can investors today benefit from Buffett's investment approach? Yes and no, argues Hagstrom. For example, Buffett spends a great deal of time reading annual reports to learn about a company.

Hagstrom writes: "It must be said here, with sadness, that it is possible that the documents you study are filled with inflated numbers, half-truths, and deliberate obfuscations. We all know the names of the companies charged with doing this; they are a rogue's gallery of American businesses, and some of their leaders are finding themselves with lots of time in prison to rethink their actions. Sometimes the manipulations are so skillful that even forensic accountants are fooled; how then can you, an investor without any special knowledge, fully understand what you are seeing? The regrettable answer is, you cannot."

Hagstrom shares a few of Buffett's tips for spotting accounting problems and irregularities in financial documents, such as looking for "unintelligible footnotes."

Also, today, the stock market is composed of many more companies. Hagstrom relates the story of Buffett's interview on the show Money World:

"Appearing on the PBS show Money World in 1993, Buffett was asked what investment advice he would give a money manager just starting out. 'I'd tell him to do exactly what I did 40-odd years ago, which is to learn about every company in the United States that has publicly traded securities.'

Moderator Adam Smith protested, 'But there's 27,000 public companies.'

'Well,' said Buffett, 'start with the A's.'"

Further, Hagstrom argues too many desirable investments are in the field of high technology. To those investors wishing to follow Buffett's approach to investing, Hagstrom suggests: "...expand your circle of competence by studying intently the business models of the companies participating in the New Economy landscape..." Investors who are less willing to spend time understanding business might want to consider indexing their money in a low-cost mutual fund instead.

If you want to understand the investment principles of Warren Buffett, I highly recommend "The Warren Buffett Way."

Peter Hupalo, Author of "Becoming An Investor"


Rating:
Summary: The Theory of Investing finally has a title
Review: Reading this book gives one the essential knowledge of a successful investment strategy. The book is not meant to make you rich, but establish a wealth of knowledge through a voyage into the mind of one oof the greatest investors of our time. The essential message of the book is buying value within your circle of experiance. The author outlines the people who influnced Buffet's way of thinking, and thier theories on investing. Great read

Rating:
Summary: Revised Viewpoint is More Interesting
Review: First published in 1994, ten years ago the Warren Buffett Way introduced us to the way he evaluated and chose stocks. Since that time, his magic has continued --he is number two on the Fortune list of the richest Americans, and the only one in the top five who made his fortune in the stock market.

His basic rule is very simple: invest in businesses that are simple and understandable, have a consistent operating history and have favorable long term prospects. Now, keep that in mind while the world is changing about you, while people are crashing airplanes into buildings, going to war in Iraq, through inflation, deflation, stock booms and busts, and all the personal troubles that we fall into.

This second edition is completely revised and brought up to date and includes two new chapters that help to update and revise his strategy. This is one of those books that you simply must be aware.

Rating:
Summary: Worth the read
Review: If you are reading this book just to be better informed, I think you will get your money's worth. I feel I got a five-star education. But if you are going to read it to make a decision to buy or not to buy Berkshire Hathaway, you should keep these two points in mind: First, almost everyone considers Warren Buffet to be the world's greatest investor. This special attribute of Mr. Buffet might be reflected in the price of Berkshire Hathaway stock. If Warren Buffet were no longer around, what would that do to Berkshire Hathaway? Hasn't Mr. Buffet's greatness built in a premium in Berkshire Hathaway stock?

Second, this book proves that Mr. Buffet beat Mr. Market most of the time under normal circumstances. In abnormal circumstances, Mr. Market could beat Mr. Buffet. Abnormal circumstances would exist if Mr. Market went into a long, deep depression (like he did in the 1930's and dropped in value by 90%). And could a second terrorist attack similar to 9/11 cause Mr. Market to panic and create abnormal circumstances in the economy?

No matter how good the company, Mr. Market can and will hurt the value of its stock. If there is another terrorist attack like 9/11, Mr. Market will panic and Coca Cola, Washington Post, GEICO, etc., would all suffer terribly.