Buffett on Taxes (1965 version)

Posted on 6 CommentsPosted in Investment Quotes, Portfolio Management, Warren Buffett

“One of my friends—a noted West Coast philosopher—maintains that a majority of life’s errors are caused by forgetting what one is really trying to do.” – Warren Buffett, 1965 BPL Partnership Letter I’ve read a few things lately discussing the benefits of designing a “tax-efficient” investment strategy. I’ve said this before, but I think there is a significant misunderstanding on the tax benefits of a low-turnover portfolio, and there is an even larger misunderstanding on the concept of turnover itself. […]

Drivers of ROE in the Context of Portfolio Management

Posted on 18 CommentsPosted in Portfolio Management, Think Differently, Warren Buffett

Someone on the Corner of Berkshire and Fairfax board recently posted this comment referencing Buffett’s well-known piece on inflation from 1977. In the article, Buffett describes the variables that drive a company’s return on equity. There are only five ways that a company can improve returns: Increase turnover Cheaper leverage (reduce interest charges) More leverage (increase the amount of assets relative to a given level of equity) Lower income taxes Wider margins Notice three of the five drivers of ROE have […]

Focus on the Key Variables of an Investment

Posted on 10 CommentsPosted in Case Studies, Investment Quotes, Warren Buffett

Earlier this year I watched Lang Lang play Grieg’s Piano Concerto in A Minor—one of my all-time favorite pieces of music. The concerto is a monster—full of big octaves, virtuosity, excitement and power. It has around 30,000 notes, but the music is tied together with a simple 10 note melody that is repeated throughout the piece. I am currently working on a few different investment ideas that have numerous moving parts, but as I conduct my research, I continue coming back to […]

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 […]

The Simple Concept of Intrinsic Value

Posted on 22 CommentsPosted in Ben Graham, Investment Philosophy, Warren Buffett

“The newer approach to security analysis attempts to value a common stock independently of its market price. If the value found is substantially above or below the current price, the analyst concludes that the issue should be bought or disposed of. This independent value has a variety of names, the most familiar of which is “intrinsic value”. – Ben Graham, Security Analysis (1951 Edition) Graham went on to say this about the definition of intrinsic value: “A general definition of intrinsic […]

Buffett Thoughts on GEICO in 1976

Posted on 8 CommentsPosted in Investment Philosophy, Warren Buffett

I’ve been spending the vast majority of my time working on a number of new investment ideas, but I do find time to catch up on reading the paper. Earlier this week I came across a post on one of the Wall Street Journal blogs that posted a copy of an old letter that Warren Buffett sent to George Young at National Indemnity (a Berkshire owned insurance subsidiary) regarding his thoughts on GEICO. I’ve written a few posts on Buffett […]

Some Thoughts on Investment Strategies and Buffett’s 1966 Disney Investment

Posted on 11 CommentsPosted in Investment Philosophy, Superinvestors, Warren Buffett

There seems to be a strange dichotomy in the value investing universe: those who buy so-called compounders, and those who buy so-called cheap stocks. I want to own businesses that are building value, but that doesn’t mean I don’t care about valuation. I pass on probably 99% of the ideas I look at, many of which are great businesses, simply because the current price won’t allow my investment in the stock to compound at the rate of return that I’m […]

Walking, Thinking, and Investing

Posted on 8 CommentsPosted in General Thoughts, Investment Philosophy, Think Differently, Warren Buffett

I just came across an article I just read that I thought was interesting, and thought certain readers might enjoy. Although the article has nothing directly to do with investing, I think there are some takeaways for those of us in the investment world. Certainly the article has relevance to anyone whose chosen endeavor requires the occasional deep thinking. The article is called “Why Walking Helps Us Think”. The article—as you probably guessed from the self-explanatory title—describes the benefit of […]

Circle of Competence, Fat Pitches, and How To Become the Best Plumber in Bemidji

Posted on 4 CommentsPosted in Charlie Munger, Investment Philosophy, Investment Quotes, Overall Stock Market, Superinvestors, Warren Buffett

“The way to win is to work, work, work, work and hope to have a few insights.” – Charlie Munger I came across a post on one of my favorite sites (Farnam Street) about Buffett on some fundamental keys to successful investing. I’ve always thought the most important aspect of investing is waiting for the proverbial “fat pitch”. As readers know, I’m a baseball fan (I love the game, and I love the numbers that are part of the fabric […]

Buffett’s PetroChina Investment: Finding Large Gaps Between Price & Value

Posted on 17 CommentsPosted in Case Studies, Investment Philosophy, Investment Quotes, Superinvestors, Warren Buffett

“You don’t have to know a man’s exact weight to know that he’s fat.” – Ben Graham I was reading through some notes from the 2008 Berkshire Hathaway Annual Meeting and one of the questions grabbed my attention. The question was pertaining to Warren Buffett’s decision to purchase stock in PetroChina back in 2002. Basically, the questioner was surprised that Buffett made such a sizable investment after a seemingly small amount of due diligence saying “all you did was read the annual report… […]