Fund or
affiliation
- Buffett Partnership
until 1959
- Berkshire Hathaway
Methodology
- Buying good business
franchises at very low valuations and holds
forever.
Research/ Valuation
Techniques Employed
- Qualitative analysis
of companies. He perfectly understands the
companies he owns stock in as businesses: living
organism.
- Principles
influenced by Benjamin Graham, but modified. Also
emphasis on strength of business franchises.
- Wonderful
businesses:
- Good return on
capital without accounting gimmick or leverage.
- They are
understandable.
- See their profits in
cash.
- Have strong
franchise and freedom to price.
- Don’t take a
genius to run.
- Earnings are
predictable.
- Not natural targets
of regulation.
- Low inventories and
high asset turnover.
- Management is owner
oriented.
- High rate of return
on total of inventories plus plant.
- Best business is a
royalty on the growth of others, requiring little
capital itself, such as Marsh McLennan.
Trading Techniques
Employed
- There are very few
companies he considers interesting enough to buy
at all, and even those he will look at only when
they are very unpopular. Of course, one must know
for certain what the values really are if one is
to have the confidence to buy in the teeth of a
panic.
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Philosophy
and beliefs
- An investor’s
six qualities:
- Fascinated by the
investment process.
- Patience.
"Happy with [your holdings] if the stock
exchange closed down for the next 10 years."
- Think independently.
- Have self-confidence
from knowledge, not from being rash or
headstrong.
- Accept it when you
don’t know something.
- Be flexible as to
the type of business you buy, but never pay more
than the business is worth.
- After purchasing
Berkshire Hathaway, Buffett has a firm conviction
never to buy another "turnaround".
History and other
facts
- Buffett Partnership
was launched in 1956 at an age of 25 with
$100,000. Buffett shares 25% of the profits above
6%. Objective was to beat Dow by 10% a year.
- Buffett Partnership
bought undervalued listed stocks, did merger
arbitrage, and participated in private equity.
- Buffett Partnership
promised his co-investors:
- Investments are
chosen on the basis of value, not popularity;
- Will attempt to
reduce permanent capital loss (not short-term
quotational loss) to a minimum.
Examples
- During 1973/ 74
collapse, he bought:
8% of Ogilvy & Mather
16% of Interpublic
11% of Washington Post
Capital Cities and Knight-Ridder Newspapers
Performance Record
- 28.6% over 37 years:
"Buffett Partnership... of 29.5% for 1957-69
inclusive. From 1970 through 1994, shares of
Berkshire Hathaway advanced at a compound rate of
28.2% ", Buffett, Roger Lowenstein, pp. 425,
note 1.
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