For new visitors, the number of articles on this site can be overwhelming. This is intended as a guide for new readers who are not sure where to start. The following articles will give you a good overview of how Warren Buffett invests, and what is available here.
This is a site dedicated not just to Warren Buffett but to Benjamin Graham and the idea that buying shares as an investment will, in the longer run, provide greater and safer returns than buying shares as a speculation. This principle may sometimes be called value investing but we would prefer to adopt the words so famously used by Bemjamim Graham and call it intelligent investing.
Here are some ways for you to navigate this site.
- 1 Grasping the concept of intelligent investing
- 2 Finding out how Warren Buffett invests
- 3 Specific Buffett concepts
- 4 Company management
- 5 Some things that you need to understand to understand the Buffett strategy
- 6 Berkshire Hathaway
- 7 Some companies
- 8 Books about Buffett, books that we like to read and books that Warren likes to read
Grasping the concept of intelligent investing
Ben Graham was Warren Buffett’s mentor and is the so-called father of value investing, which we prefer to call intelligent investing and which Warren Buffett has modified and taken to a new level. Read our short biography of Ben Graham and our summary of his investment principles and either follow the links in that article or look at these articles on specific principles originated by Graham or associated with him such as:
- Value investing
- Intrinsic value and how to find it
- Mr Market
- The margin of safety
- Book value
- Defensive investing strategies (and how Warren Buffett has modified it).
In understanding Benjamin Graham, there is no substitute for reading the words of the great man himself. His classic work The Intelligent Investor should be permanently on the desk of every aspiring investor (and a second copy beside the bed). He also wrote a small book called The Interpretation of Financial Statements which explains complex financial concepts in simple terms and which we find invaluable.
Finding out how Warren Buffett invests
Nobody can be 100 per cent sure of why Warren Buffett puts money into certain investments and steers away from others. He leaves clues behind in his letters to shareholders, interviews, public statements and discussions with financial writers and authors. We have spent many years investigating these sources and looking at his investments and believe that we have come up with a working model of the principles that seem to guide him.
You should first of all read our short biography of Warren to get some understanding of his path to sucesss. We have summarized what we believe are Warren Buffett’s investment principles and tried to bring them all together. In these two articles, you will find links to specific explanations of his investment principles and you should follow those links for further clarity.
Specific Buffett concepts
Like Benjamin Graham, Buffett has come up with particular ideas that are associated with him. These concepts obviously play a big part in his investing strategy and should be in the mind of every careful and intelligent investor. They include:
- Economic good will
- Durable competitive advantage, which is often, but not always associated with having a good and well known brand name
- Owner earnings
It is important for Warren Buffett that companies in which he invests have good and honest managers. In particularly he is concerned with the ability of company management to:
- deal with inflation
- capably allocate capital and deal with retained earnings
- to only engage in share buy backs when they are in the best interests of shareholders
- Grow the company
Buffett believes, as do we, that a company whose managers cannot or will not do these things well and who do not keep their eye on the main game are not worth investing in. In particular, companies that steer away from their core business should be avoided.
Some things that you need to understand to understand the Buffett strategy
If you want to get your head around why Buffett does what he does, you need to also understand, and realise the importance to him, of some investment concepts. These include:
- Why high returns on equity and capital are important
- How debt stops companies from growing
- The difference between earnings yields and dividend yields
- The importance of the price/earnings ratio in determining value
- The magic of compounding
- The importance of good investment choices and why investing in gold is not one of them
Buffett’s main investment vehicle is Berkshire Hathaway, a struggling mill company that he bought and turned into an investment giant with its fingers in money pies all around the world. You might like to read the first part of our short history of Berkshire Hathaway and then look at who is likely to succeed Warren Buffett and whether that man will be Ajit Jain, our personal pick at the moment.
Buffett has not done it all on his own however and always gives full credit to his good friend and long term business partner Charlie Munger with whom he teamed up with many years ago on the acquisition of Geico, one of a number of insurance companies that provide them, via Berkshire, with the necessary capital to make their big share plays.
The investments of Buffett and Berkshire Hathaway are many and varied. We have looked at just a few companies that Buffett has and has not put his money into. Some of the businesses discussed on these pages that you might like to look at are:
Books about Buffett, books that we like to read and books that Warren likes to read
The gratifying thing about the books that we like to read and those that Buffett recommends is that we sometimes agree. That makes us feel good but we suspect that our book choices probably do not register nearly so much in the mind of the Sage of Omaha as his do on ours. Anyhow, you can see our books reviews on our book review page and also look at those that Buffett recommends from time to time.
There are heaps of books about Warren Buffett and we think that we have reviewed the best of them on our pages.
We hope that you will enjoy this website, and find it instructive. There are many more articles on here which you can read at your leisure. If you enjoy what you find here, you can also subscribe to get new updates via twitter, facebook, or RSS.