Value Investing - ‘The Warren Buffett Way’
This article is primarily a review of the book ‘The Warren Buffett Way’ by Robert G. Hagstrom.
The purpose of this review is to introduce you to the fundamentals of value investing, as practiced by Warren Buffett and described in ‘The Warren Buffett Way - Investment Strategies of the World’s Greatest Investor’
When you read this essay, you will discover key Buffett value investing tenets including:
- “margin of safety”
- “simple and understandable”
- “consistent operating history”
- “favorable long-term prospects”
You will learn the twelve key value investing tenets identified by Hagstrom as characterising Buffett’s approach to investing, which means you will be able to apply those same tenets when evaluating investment decisions of your own. And that means you will be able to reduce your risks and improve your returns.
If this book summary and review provides you with sufficient interest to explore the subject further, I encourage you to invest the time to read The Warren Buffett Way - Investment Strategies of the World’s Greatest Investor’
You would also be well served to read all of Warren Buffett’s writings available in Berkshire Hathaway’s famous annual reports, along with his annual letters to shareholders.
In his book, Hagstrom identifies a set of key investing tenets used by Warren Buffett to identify companies that represent long term assets for capital growth and recurring income, the two key pillars of wealth creation
As Peter Lynch points out in his forward to Hagstrom’s book, Warren Buffett sets a very high standard for investment performance; an objective of growing intrinsic value by 15 percent per annum over the long term.
My understanding of Buffett’s approach to value investing could be summarised as:
Value first (cashflow) and Growth second (equity)
In Chapter Two - “The Two Wise Men”, Hagstrom documents the manner in which Buffett obtained his education in investing from two wise men, Benjamin Graham and Philip Fisher. I will draw out some of the key points from that Chapter, as they elucidate the development of Buffett’s investment philosophy.
Buffett has stated that he is “15 percent Fisher… and 85 percent Benjamin Graham.”
Benjamin Graham had a strong start to his investing career at an early age. By 1919, at the age of 25, he was already earning a $600,000 per annum salary as a partner in a Wall Street brokerage firm, Newburger, Henderson & Loeb.
“In 1926, Graham formed an investment partnership with Jerome Newman. It was this partnership that hired Buffett some thirty years later. Graham-Newman survived the 1929 crash, the depression, World War II and the Korean War before it dissolved in 1956.”, p. 28.
After being financially ruined in the 1929 crash, Graham set about rebuilding his fortune and defining a model for analysing investments designed to ensure he never lost his fortune again.
Ben Graham first published his investment analysis model in his comprehensive work on conservative investing, titled ‘Security Analysis’ in 1934, after several years of reflection and research while teaching night courses on finance at Columbia from 1928.
The principle tenet of Benjamin Graham’s investment philosophy is to ensure there is a “margin of safety” built in to any investment.
Graham continued to refine and update his book ‘Security Analysis’ (Hardcover)
The first rule of investing according to Graham:
“Don’t lose.”
The second rule is “Don’t forget rule number one.”
Early on in his investing career, Warren Buffett took Ben Graham’s work as the bedrock upon which he would build his investing philosophy.
Fledgling investors of all stripes would do well to follow his example, modified with the addition of some principles Buffett learned from Philip Fisher.
Buffett began studying Philip Fisher’s writings as early as 1969. A key tenet of Fisher’s that appealed to Buffett was that of investing in companies that were within the investor’s circle of competence.
Fisher’s book ‘Common Stocks and Uncommon Profits’ (Hardcover)
As his experience and skills as a value investor developed, Buffett took the position that buying an outstanding business at a good price is superior to buying a good business at a cheap price.
Charlie Munger was instrumental in bringing Buffett further towards Fisher’s thinking regarding this approach.
In Chapter Four - “Buying a Business”, Hagstrom identifies Buffett’s set of basic principles, or tenets, that guide his decisions.
“…they naturally group themselves into four categories:
- Business tenets - three basic characteristics of the business itself.
- Management tenets - three important qualities that senior managers must display.
- Financial tenets - four critical financial decisions that the company must maintain.
- Market tenets - two interrelated cost guidelines.”, p. 76.
Hagstrom points out that not all of Buffett’s acquisitions display all of the tenets, but “take as a group, these tenets constitute the core of his equity investment approach.”
BUSINESS TENETS
For Buffett, business fundamentals are what matter.
“Rather, his investment actions are related only to how a business operates.”
All noise from the market is superficial and illusory; market theories, macroeconomic concepts and the like are phantasms that only serve to distract the value investor from his main game.
“Instead, Buffett concentrates on learning all he can about the business under consideration, focusing on three main areas:
- Is the business simple and understandable?
- Does the business have a consistent operating history?
- Does the business have favorable long-term prospects?”, p. 76.
Let’s explore in brief what Hagstrom identifies Buffett as looking for with these three tenets.
Simple and Understandable - “In Buffett’s view an investor’s financial success is in direct proportion to the degree in which he or she understands the investment.”, p. 77.
“Buffett is able to maintain a high level of knowledge about Berkshire’s businesses because he purposely limits his selections to companies that are within his area of financial and intellectual understanding”, p. 77.
Buffett has said “Invest within your circle of competence. It’s not how big the circle is that counts, it’s how well you define the parameters.”, p. 77. This is virtually direct from the teachings of Fisher.
Consistent Operating History (Summarised from p. 78.) - Buffett has achieved strong returns through investing consistently in companies that have been successfully producing and selling the same product or service for several years at least.
Accordingly, he stays away from companies that are changing direction, or undertaking a “turnaround” or any other form of severe change. As Hagstrom points out, in Buffett’s experience, “turn-arounds” rarely turn. Buffett avoids difficult business problems, rather he concentrates on solving stepping over a series of small hurdles.
Favorable Long-Term Prospects - “According to Buffett, the economic world is divided into a small group of franchises and a much larger group of commodity businesses, of which most are not worth purchasing.”, p. 78.
“He defines a franchise as a company providing a product or service that is:
- needed or desired
- has no close substitute
- is not regulated”, p. 78.
This means a franchise can regularly increase prices without fear of losing market share or unit volume. They can therefore earn above-average returns on invested capital.
They also “possess a greater amount of economic goodwill, which enables them to better withstand the effects of inflation.
Refer to pages 76-79 of ‘The Warren Buffett Way’ for a full explanation of the above three business tenets.
MANAGEMENT TENETS
Buffett looks for managers who unfailingly behave and think like an owner of the company. Increasing shareholder value ought to be the primary objective of all managers.
Buffett pays a lot of attention to the quality of management. He only invests in companies that are “operated by honest and competent people, managers for whom he can feel admiration and trust.”
“Specifically, he considers these main areas:
- Is management rational?
- Is management candid with the shareholders?
- Does management resist the institutional imperative?”, p. 80.
Rationality - the quality Buffett believes distinguishes his management style.
“Deciding what to do with the company’s earnings - reinvest in the business or return to the shareholders - is, in Buffett’s mind, an exercise in logic and rationality.”, p. 80.
This allocation of a company’s capital is the most important act performed by management.
Are executives actively buying their own company’s stock in the market?
To paraphrase Hagstrom, Buffett says that this can be a strong sign of a well-managed company, whose managers are demonstrating that they have the best interests of their owners at hand.
Candor- Are managers reporting their companies’ financial performance fully and genuinely? Are they admitting their mistakes as well as sharing their successes? Are they candid with shareholders in all ways?
Buffett himself writes in Berkshire’s annual report “Mistake Du Jour”, where he confesses “not only mistakes made but opportunities lost because he failed to act appropriately.”, and “The CEO who misleads others in public may eventually mislead himself in private.”
“Buffett credits Charlie Munger with helping him understand the value of studying one’s mistakes, rather than concentrating only on success.”, p. 84.
The Institutional Imperative - “an unseen force … the lemming like tendency of corporate management to imitate the behavior of other managers, no matter how silly or irrational it may be.”
Discovery of the Institutional Imperative was according to Buffett the most surprising discovery of his business career.
A lust for activity and constant comparison to one’s peers are the two primary symptoms Hagstrom points to that Buffett has identified as causing corporate hyperactivity.
Refer to pages 80-87 of ‘The Warren Buffett Way’ for a full explanation of the above three Management Tenets.
FINANCIAL TENETS
“Profitable business returns might not coincide with the time it takes for the planet to circle the sun.”
Buffet “does not take yearly results too seriously. Instead, he focuses on four or five year averages”
Buffet “is guided by these principles:
- Focus on return on equity, not earnings per share.
- Calculate “owner earnings” to get a true reflection of value.
- Look for companies with high profit margins.
- For every dollar retained, make sure the company has created at least one dollar of market value. “, p. 87.
Return on Equity - “Customarily analysts measure annual company performance by looking at earnings per share. … Buffett considers earnings per share a smokescreen.”
According to Buffett, “the primary test of managerial performance is the achievement of a high earnings rate on equity capital employed … and not the achievement of consistent gains in earnings per share.”
“To measure a company’s annual performance, Buffett prefers return on equity - the ratio of operating earnings to shareholder’s equity.”
Hagstrom then goes on to explain the various adjustments an investor must make in order to make effective use of this ratio as a meaningful measure of company performance. He also explains how Buffett prefers to borrow money anticipating future needs, rather than when the need has arrived. “If you want to shoot rare, fast moving elephants, you should always carry a gun.”
“Owner Earnings” - Buffett adopts the premise that accounting earnings per share are the starting point for determining the economic value of a business. He warns that cash flow is not a perfect tool for measuring value. In fact, it often misleads investors.
Quoting Hagstrom directly “A company’s cash flow is customarily defined as net income after taxes plus depreciation, depletion, amortization, and other non cash charges. The problem with this definition … is that it leaves out a critical economic fact: capital expenditures.”, p. 90.
“According to Buffett, approximately 95 percent of America’s businesses require capital expenditures that are roughly equal to their depreciation rates.”, p. 90.
“Instead of cash flow, Buffett prefers to use what he calls “owner earnings”- a company’s net income plus depreciation, depletion, amortization, less the amount of capital expenditures and any additional working capital that might be needed.”
“”Calculating future capital expenditures often requires rough estimates. Still, quoting Keynes, he says, “I would rather be vaguely right than precisely wrong.”", p. 91.
Having thought about this at length, for I can be very pedantic when it comes to the application of generally accepted formulas and rules, I can see that Buffett’s beyond fifth sigma success arises precisely because he is willing to completely ignore the “Institutional Imperative”, be a contrarian and follow his own powerful logic and rationality to determine what constitutes real, versus illusory value.
Profit Margins - “great businesses make lousy investments if management cannot convert sales into profits.”, p. 91.
“Managers of low-cost operations are always finding ways to cut expenses.”, p. 91.
Great managers do this like mammals breath air and fish swim in water, automatically, without the need for a conscious decision and effort toward that practice.
“Berkshire does not employ security guards, limo drivers, or messengers. Berkshire’s after-tax overhead corporate expense runs less than 1 percent of operating earnings.”, p. 91.
The One-Dollar Premise - This is Buffett’s quick test “to judge not only the economic attractiveness of a business but how well management has accomplished its goal of creating shareholder value.”, p. 92.
Buffett says “it is our job to select a business with economic characteristics allowing each dollar of retained earnings to be translated eventually into at least a dollar of market value.”, p. 92.
MARKET TENETS
Everything considered to this point brings one to the decision point - to buy or not to buy shares in the company.
On page 92, Hagstrom writes “Anyone at that point must weigh two factors: Is this company a good value and is this a good time to buy it - that is, is the price favorable?”
He then goes on “Price is established by the stock market. Value is determined by the analyst, after weighing all the known information about a company’s business, management and financial traits. Price and value are not necessarily equal.”
After a little more commentary about the actions and intentions of investors and analysts with respect to price and value, Hagstrom asserts “In sum, then, rational investing has two components:
- What is the value of the business?
- Can the business be purchased at a significant discount to its value? “, p. 93.
Determine the Value - Hagstrom discusses the three traditional ways of valuing a business: liquidation, going-concern, or market.
He writes that “Liquidation value is the cash value generated by selling the assets of the business net of all liabilities.” “Going-concern value … determines the future cash flows … discounted back to the present using an appropriate rate.”, Hagstrom p. 93.
Market value is determined by comparing the company to other similar listed companies and applying an appropriate multiple.
The best system according to Buffett “was determined more than fifty years ago by John Burr Williams in ‘‘The Theory of Investment Value’ (Contrary Opinion Library) (Paperback)
“Paraphrasing William’s theory, Buffett tells us the value of a business is determined by the net cash flows expected to occur over the life of the business, discounted at an appropriate interest rate.”, p. 94.
First Buffett determines the future cash flows of a business, then he applies the discount rate. For that, Buffett simply uses “the long-term U.S. government bond rate … as close as anyone can come to a risk-free rate.”, p. 94.
Hagstrom then provides further explanation of how Buffett manages risk, pointing out that for Buffett “Growth and value investing are joined at the hip.”
Buy at Attractive Prices - “Focusing on businesses that are understandable, with enduring economics, run by shareholder-oriented managers does not guarantee success, Buffett notes.”, p. 96.
Mistakes arise either in (1) the price paid, (2) the management joined, or (3) the future economics of the business.
Miscalculations of (3) are the most common cause of investment mistakes.
“Graham taught Buffett the importance of buying a stock only when the difference between its price and its value represented a margin of safety.”, p. 96.
This principle achieves two goals. First is protection against downside risk and second is the opportunity provided for extraordinary returns. Hagstrom explains why this is so.
To summarise, if you are buying at a market price sufficiently less than the intrinsic value of the stock, there is a big enough margin for there to be a decline in intrinsic value and still protect the stock price. Furthermore, the stock price will over time steadily climb to mimic the returns of the business, so if you have correctly identified intrinsic value, you will also have ensured ” an extra bonus when the market corrects the price of the business.”, p. 97.
THE INTELLIGENT INVESTOR
It is clear that when Buffett chooses to invest in a company, he is buying a business, not pieces of paper.
“In the summation of ‘The Intelligent Investor’: The Classic Text on Value Investing (Hardcover)
“I am a better investor because I am a businessman and a better businessman because I am an investor.” confesses Buffett.
When asked what type of businesses he will consider purchasing in the future, Buffett replies along these lines. “he will avoid commodity businesses and managers in which he has little confidence. What he will purchase is the type of company that he understands, one that possesses good economics and is run by trustworthy managers.”, p. 98.
Thus concludes Chapter Four - “Buying a Business” of ‘The Warren Buffett Way’.
Chapters Five, Six and Seven are titled “Permanent Holdings”, “Fixed-Income Marketable Securities” and “Equity Marketable Securities”. As they contain Hagstrom’s analysis of the specific company stocks Buffett has invested in via the application of the aforementioned tenets, they do not lend themselves to summarisation so well as the first four chapters of the book.
If you are interested to know the specific stock investments that Buffett made to build the multi-billion dollar wealth of Berkshire Hathaway, when and why he purchased those stocks, then you need to read these chapters in full for yourself.
I will extract some of the more interesting elements. Here are a few tempters to whet your appetite:
Chapter Five - “Permanent Holdings”
I will give only a strictly limited number of extracts from this chapter, as it is best experienced directly with your own eyeballs and brain.
“Buffet confessed in 1987 that there are three common-stock positions that he will not sell, regardless of how seriously the stock market may overvalue their shares: The Washington Post Company, GEICO Corporation and Capital Cities/ABC. In 1990, he added The Coca-Cola Company to this list of permanent common-stock holdings.”, p. 100.
“Since 1980, the market value of GEICO has grown from $296 million to $4.6 billion in 199 - an increase of $4.3 billion. During these thirteen years, GEICO earned $1.7 billion. It paid shareholders, in common stock dividends, $280 million and retained $1.4 billion for reinvestment. Thus, for every dollar retained, GEICO created $3.12 in market value for its shareholders.”, p. 128.
“Further proof of GEICO’s superiority: A $1 investment in GEICO in 1980, excluding dividends, increased to $27.89 by 1992. This is an astonishing 29.2 percent compounded annual rate of return, far greater than the 8.9 percent industry average”, p. 128.
“Since 1987, the market value of Coca-Cola has risen from $14.1 billion to $54.1 billion (1992). The company has produced $7.1 billion in earnings while paying out $2.8 billion in dividends to shareholders and retaining $4.2 billion for reinvestment. For every dollar the company has retained, it has created $9.51 in market value. Berkshire’s $1.023 billion investment in Coca-Cola in 1988-1989 was worth $3.911 billion by 1992.”, p. 157.
“The best business to own, Buffett says, is one that over time can employ large amounts of capital at very high rates of return. This description fits Coca-Cola. Coca-Cola is the most widely recognized and esteemed name brand in the world. It is easy to understand why Buffett considers Coca-Cola to be the most valuable franchise in the world.”, p. 158.
I conclude the summation of this chapter Five on “Permanent Holdings” with the observation that Hagstrom does a fantastic job to present the investment case and the thinking that Buffett put into each investment decision, presented under the sub-headings of the relevant tenets taken from Chapter Four.
Chapter Six - “Fixed-Income Marketable Securities”
In this chapter, Hagstrom uncovers some of the shrewd investments Buffett has made in fixed income marketable securities such as municipal bonds. Buffett invested in several bonds that were substantially depressed below book value due to various market events. He made handsome profits out of several.
This chapter also presents an example of how Buffett achieved an annual return of about 25 percent pretax using a risk-assessed arbitrage strategy.
There is a recounting of the extraordinary events that befell Salomon, Inc., leading to Buffett assuming the role of interim chairman. Due to the admission of Salomon’s violations of Treasury auction rules, Salomon’s top officers called Buffett to tell him they were going to resign. Their stock price dropped from $37 to $16 in August 1991.
Buffett took over as interim chairman in September 1991, then stepped down in June 1992, appointing “Robert Denham, managing partner of Munger Tolles & Olson (Charlie Munger’s law firm)” first as Salomon’s top lawyer, then to the position of non-executive chairman after Buffett resigned as interim chairman, having worked some Buffett magic.
From those changes, the stock price had risen 193 percent to $47 per share by December 1993. In early 1994, Buffett “purchased 5,519,800 shares of Salmon common stock.”
“By becoming an owner of common shares, Buffett’s confidence in Salomon as a business has demonstrably increased.”
These above paragraphs summarise parts of the section “Salomon, Inc.” p. 169 - 173.
Then there is the story of Buffett’s investment of $358 million in USAir, right before it encountered severe merger turbulence, and no sooner was that corrected, then “the economics of the airline industry have deteriorated at an alarming pace, accelerated by the kamikaze pricing tactics of certain carriers.”
“The problem in a commodity business, Buffett learned, is that you are only as smart as your dumbest competitor.”
Next there was the terrifying altitude drop of the airline industry in 1991, when “the airline industry had its worst year in history. Within a fourteen-month period, Midway, Pan Am, America West, Continental and TWA all filed for bankruptcy.”
“In 1991, the airline industry lost more money in one year than had been made in aggregate since the Wright brother’s first flight at Kitty Hawk.”
“USAir’s convertible investment was a mistake, “an unforced error”, Buffett confesses.”
“A student at Columbia University asked Buffett why he invested in USAir. “My psychologist asks me that too,”quipped Buffett. “Actually I have an 800 number now which I call if I ever get an urge to buy an airline stock. I say, ‘My name is Warren, I’m an air-aholic’, and they talk me down.’” “, p. 176.
Other examples of convertible preferred stock investments that have been made by Buffett documented in this chapter are Champion International and American Express.
The chapter concludes with an examination of The Real Value of Convertibles - “It is important to remember that Buffett thinks of convertible preferred stocks first as fixed-income securities and second as vehicles for appreciation.”, p. 180.
“Buffett expects that the least Berkshire will receive back from its convertible preferred stock investments is its money back plus dividends. He admittedly would be disappointed if that were all Berkshire received. Of course, Buffett realizes that in order to receive a return better than a fixed preferred return, the investee’s common stock must do well.”, p. 181.
“As a group, Buffett never expected the returns of Berkshire’s convertible preferreds to match the economics of a wonderful business. However, he does expect that the returns will outperform the results of most fixed-income portfolios.”, p. 181.
All quotes under The Real Value of Convertibles, Hagstrom p. 180-181.
So it is clear that Buffett will invest in fixed-income securities where he (1) sees a good rate of return for the placement (VALUE) and (2) believes that there is the potential for profit from increasing common stock value (GROWTH).
Chapter Seven - “Equity Marketable Securities”
This chapter applies a similar structure to non-permanent stock investments made by Buffett as that applied to Chapter Five - “Permanent Holdings”
Again, I will give only a strictly limited treatment of this chapter by making a couple of terse observations and extracting a few key pithy quotes.
On Gillette Buffett has said “It’s pleasant to go to bed every night, knowing there are 2.5 billion males in the world who will have to shave in the morning.” The serious details of why Gillette made an excellent investment for Berkshire are well worth reading.
On General Dynamics, “I n 1990, the company had combined sales of more than $10 billion. By 1993, the company’s sales were $3.5 billion.”, p. 191. (continued below)
It is a fascinating example because “It had none of the traditional markings of Buffett’s earlier purchases. It was not a company that was simple and understandable, it was not a consistent performer and it did not have favorable long-term prospects.”, p. 194.
So why did Buffett invest in General Dynamics, buying 4.3 million shares?
Because Bill Anders resisted the institutional imperative. He sold off large chunks of the company’s business, almost entirely eliminating the high level of long-term debt and dramatically monetizing the unrealised value of the company.
(continued from above) “Despite the drop in sales, shareholder value during this period increased seven-fold.”, p. 191.
“Buffet saw a company that was trading below book value, generating cash flow, and embarking on a divestiture program. Additionally, and most importantly, management was shareholder-oriented.”, p. 195.
Guinness plc “is very much the same type of company as Coca-Cola and Gillette, says Buffett, and his experience with those two companies made him very comfortable with Guinness.”, p. 204.
Tenet : Profit Margins - “The manufacture of beverage products, alcoholic or nonalcoholic, is a very profitable business. Guinness plc is not only the most profitable alcoholic beverage company in the world, it is the next most profitable beverage company in the world, second only to Coca-Cola.”, p. 207.
Wells Fargo & Company - “If General Dynamics was the most confusing investment Buffett ever made, then Wells Fargo & Company would certainly qualify as the most controversial. In October 1990, Buffett announced that Berkshire had purchased 5 million shares of Wells Fargo, investing $289 million in the company”, p. 210.
“When Buffett purchased Wells Fargo in 1990, he paid $58 per share for its stock. With 52 million shares outstanding, this was equivalent to paying $3 billion for the company, a 55 percent discount to its value.”, p. 216.
“”It’s all a bet on management, “said Charlie Munger. “We think they will fix problems faster and better than other people.” Berkshire’s bet has paid off. By the end of 1993, Wells Fargo’s price per share reached $137.” , p. 217.
Chapter Eight - An Unreasonable Man
I’m not going to give away all of Hagstrom’s gold in this final chapter, as by now you will know for sure whether you need to read this book or not. If you do, there’s no point me cadging too much from the finale and if you don’t, you don’t need to know it anyway.
But I will display just a few gleaming nuggets of golden value offered by Hagstrom, so you know true value is here, and leave the punters and speculators to pursue the fool’s gold of stock price-chasing.
“The reasonable man adapts himself to the world. The unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.” - George Bernard Shaw.
I love that Hagstrom opens the final chapter of this book on the world’s greatest investor with that quote from Shaw. Even better that he makes the following assertion:
“Shall we conclude that Warren Buffett is “the unreasonable man”? To do so presumes that his investment approach represents progress in the financial world, an assumption I freely make.”, p. 219.
“His investment performance, widely documented, has been consistently superior. As investors and speculators alike have been distracted by esoteric approaches to investing, Buffett has quietly amassed a multi-billion dollar fortune. Throughout, businesses have been his tools, common sense his philosophy.”, p. 220.
“How did he do it?”, p. 220.
“When Buffett invests, he sees a business. Most investors see only a stock price.”"His hands-on experience owning and managing a wide variety of businesses while simultaneously investing in common stocks separates Buffett from all other professional investors.”, p. 220.
“While other professional investors were busy studying capital asset pricing models, beta, and modern portfolio theory, Buffett studied income statements, capital reinvestment requirements and the cash-generating capabilities of his companies. “Can you really explain to a fish what it’s like to walk on land?” Buffett asks. “One day on land is worth a thousand years of talking about it and one day running a business has exactly the same kind of value.”", p. 220.
“We know that Buffett’s investment approach, tested over time, has been successful. Buffett’s methodology is not beyond comprehension and his relationship investing style, once unique, is now gathering proponents. At this point you may be wondering how you can adopt his investment strategies. The answer can be found in The Warren Buffett Way.”, p. 224.
From page 224 to page 236 are the most compelling passages of ‘The Warren Buffett Way’.
These pages contain a complete blueprint of the steps you need to take to behave, think and invest like Warren Buffett. As this is the mother lode of golden ore that Hagstrom laboured so long and well to deliver to owners of his book, it is only fair that if you truly want this blueprint, you ought to buy the book now to receive it.
‘The Warren Buffett Way - Investment Strategies of the World’s Greatest Investor’ paperback, 2nd edition 2005
Would you like to receive instructions from me telling you how you can take ownership of one gram of gold, current market value at least USD $25.00?
I will send you these instructions if you correctly guess what is Step 1. of The Warren Buffett Way as stated on page 224 of the book and tell me how you will master it.
“The first step is the most challenging. If you can master this step, the rest of the way is easy.”, p. 225.
What is that first step and how will you master it?
If you have read this far and you are not familiar with the book and do not yet know the answer, please email your guesses as to what is Step 1. of “The Warren Buffett Way” to me at bradley@blogandgrow.com and buy the book from Amazon.com using the above link.
The first ten correct guesses from respondents who did not already know the answer from the book or another person (I’m trusting your 100% honesty and integrity on this) and who simultaneously purchases the book from the above link (also email me your Amazon receipt confirmation) will receive instructions from me on how to receive ownership of one free gram of gold held in a Zurich vault, which at this date and time of writing has a value of USD $25.22.
That would give you small a net profit above the purchase and shipping of the book if you guess correctly.
I have invested a full working day to provide this book review and summary to you. Please do leave a comment expressing appreciation if you have found it to be of value.
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On a similar subject, focusing on another of the few outstanding value investors of the 20th century, Sir John Templeton.
Tariq Ali has written a concise, useful analysis of the ten investing maxims of Sir John Templeton on his blog “Street Capitalist” titled “Learning From Sir John Templeton”.
That analysis can be found here http://streetcapitalist.com/2008/07/09/learning-from-sir-john-templeton/
I highly recommend it as a complimentary perspective to add to the mental map of what constitutes a successful value investor.