The Warren Buffet Way by Robert Hagestrom

ISBN 0471743674
Published by John Wiley & Sons, Inc.
2^nd edition, 2005.

Warren Buffet is the greatest investor alive today. His track record speaks for itself and this book goes some small way towards explaining the inner workings of this investment genius. A few years ago I passed on buying Buffettology because I thought I wasn’t ready for it and now found this book from my best friend Vergal Walton (checkout his new Jack Higgins website coming soon here).

The Warren Buffet Way is the most readable book I’ve come across on investment so far. The essence of this book is summarised in the various chapters of the book. The stories of the companies that Buffet invests in from the earliest days to the most recent are all entertaining and extremely insightful. One of the core underlying principles is to take the long term view of with investments. And when buying shares to think of it as buying a business and behaving in a way that the owner would behave. The Dot com crash was almost a directly result of short term opportunistic investments. And the whole investment philosophy of Buffet rests on theories expounded more than 50 years ago by Benjamin Graham and David Dodd in Security Analysis as well as The Intelligent Investor also by Graham.

Historically Buffet bought sizeable interests in publicly traded companies from the Coca-Cola company to the Gillette company. And more recently he has moved into purchasing privately held companies outright. As he says he is willing to own these businesses forever. That is an exceptional attitude in investment. Hagestrom described Buffet as the focussed investor. Rather investing large sums of money in a smaller number of companies.

The Focus Investor’s Golden Rules:

1. Concentrate your investment in outstanding companies run by strong management
2. Limit yourself to the number of companies you can truly understand. Ten to twenty is good, more than twenty is asking for trouble.
3. Pick the very best of your good companies, and put the bulk of your investment there.
4. Think long-term: five to ten years, minimum.
5. Volatility happens. Carry on.

You may also be interested in reading the archives of the annual letters from Warren Buffett, chairman of Berkshire Hathaway Inc. to the shareholders here.

If you live in South Africa purchase The Warren Buffett way from Kalahari.net

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