Calculating the Return on Incremental Capital Investments

Posted on 37 CommentsPosted in Education, Investment Philosophy

“Leaving the question of price aside, 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.” – Warren Buffett, 1992 Shareholder Letter I received a lot of feedback, comments and a few questions after Connor Leonard’s guest post last week. Connor’s write-up was very well articulated, and deservedly received much praise. There were a few questions which we tried to address in comments and email […]

Importance of ROIC: “Reinvestment” vs “Legacy” Moats

Posted on 42 CommentsPosted in Investment Philosophy

I’ve talked a lot about the importance of the concept of return on invested capital (ROIC), and how it is a key driver of value in a business. Feel free to go back and read some of those posts here. In this particular post, the discussion is continued. This post is something new for BHI: it’s a guest post written by my good friend Connor Leonard (see his brief bio at the end of the post). Connor and I live […]

Warren Buffett 1998 Talk at University of Florida

Posted on 13 CommentsPosted in General Thoughts, Investment Philosophy, Investment Quotes, Superinvestors, Warren Buffett

I spent some time traveling in the car last week. Whenever I am driving by myself, I always listen to something—usually related to business or investing. I keep a long list of videos of interviews or talks that I can pick from whenever I am in the car. On this particular short trip, I had got through two different videos. I listened to this talk from 2012 where Jeff Bezos talks about Amazon Web Services—the cloud computing services business that […]

General Thoughts on Portfolio Management and Diversification

Posted on 13 CommentsPosted in General Thoughts, Investment Philosophy, Investment Quotes, Walter Schloss

“Ship your grain across the sea; after many days you may receive a return. Invest in seven ventures, yes, in eight; you do not know what disaster may come upon the land.” –Ecclesiastes 11:1-2 Investors have always discussed and debated the merits of diversification—apparently even as far back as the days of King Solomon (although his definition of diversification—7 or 8 “ventures”—might not sit well with modern day portfolio theory and mutual fund managers who often hold 30, 50, or 100 […]

Valeant, Short Selling, and the Too-Hard Pile

Posted on 12 CommentsPosted in Case Studies, Investment Philosophy

In general, I find reading short reports to be a very valuable exercise. I don’t do much shorting in my partnership, but I find that for the most part, short sellers provide a useful service to the capital markets and I think that the good short sellers (who are few and far between) often do more thorough investigative analysis than the vast majority of long-only investors. For a good book on shorting, I recommend reading Scott Fearon’s book called Dead […]

David Einhorn and Reasons Why Widely Followed Stocks Get Mispriced

Posted on 10 CommentsPosted in Books, Case Studies, Investment Philosophy

Over the weekend I was reading David Einhorn’s book Fooling Some of the People All of the Time. I’ve had it on my bookshelf for some time, and it has always taken a back seat to other books until I decided to pick it up recently. It’s an entertaining read, basically recounting his short thesis on Allied Capital in great detail. It is a good book because it provides a glimpse into the significant amount of research and due diligence […]

James Tisch Investment Philosophy and Some Thoughts on Loews

Posted on 9 CommentsPosted in Investment Philosophy

“Buy when everyone else is selling and hold until everyone else is buying.” -J. Paul Getty I recently came across a transcript of a talk that James Tisch gave to a group of students at Columbia. Tisch runs Loews (the conglomerate, not the home improvement store). Loews (L) has struggled in the past few years, but the long term investment record is outstanding. The stock price has compounded at 17% over the past 50 years. I’ve never invested in Loews—the operating results of […]

Charlie Munger Comments and the Art of Stock Picking

Posted on 6 CommentsPosted in Charlie Munger, Investment Philosophy

Charlie Munger is not only insightful, but he’s an entertaining guy to listen to. These Munger comments below were compiled by Aznaur Midov from the annual meeting for Daily Journal Corporation, a company that Munger chairs. I just thought I’d highlight a few comments that I thought were interesting. Munger talked about moats a couple times during the meeting. The first time he recited a few examples of formerly great companies that had significant competitive advantages, but due to the nature […]

Risk and Portfolio Management Similarities between Joel Greenblatt and Stanley Druckenmiller

Posted on 6 CommentsPosted in Case Studies, Investment Philosophy, Joel Greenblatt, Portfolio Management, Superinvestors

I have been busy over the past couple of weeks. My wife gave birth to twins about two weeks ago, and now that I am back in the office, I am catching up on some reading. While we were in the hospital for about a week, I did have some time to do some reading, and I have some comments on two annual reports of current holdings of mine—JP Morgan and Markel—which I may turn into brief posts. But briefly, […]

Things You Didn’t Know About Buffett’s Strategy

Posted on 6 CommentsPosted in Investment Philosophy, Shareholder Letters & Reports, Superinvestors, Warren Buffett

Last weekend I spent a couple hours reading through Buffett’s old partnership letters (again). I was looking for something specific that I remembered him talking about, but then as I was flipping through them trying to find this comment, I just decided to read them again. I’ve always found it extremely valuable to read Buffett’s letters. Although I’ve read both the partnership letters and the Berkshire letters multiple times, I feel like I pick up something new each time I […]