Book Review: Buffett: The Making of An American Capitalist (Biography) June 14, 2007
Posted by mrswyx in Biography, Buffett, Random Walk, Review.add a comment
Reviewed by HZP
Here are some of his principles that you may find useful/inspirational/totally useless:
Investment
- Buy shares of monopolies
- Buy them at really low prices, and hold them
- When prices are high, it’s ok to hold cash
- Understand the business
- Whether the business is capital intensive or not is not an issue. As long as it’s a solid stable business, it’s fine.
- Buy well-managed companies
- Be fearful when others are greedy, and vice versa.
- When deciding whether to invest, ask yourself: would you dare to set up a company to compete against it?
- Study your prospects, and their competitors, in detail.
- Ignore most stocks because they are not going to be worth your time.
- Stick to your conclusions; if they are well researched, you will be right in the long term.
General finance
- Treat $5 as if it were $5 million
- All that matters is the rate of return. It’s better to earn 10% on a $5000 investment, than 5% on a $1 million investment. His reasoning being that he can earn the 10% on $5000, and find better investments for the remaining $995,000.
- Be very stingy. He loaned money to his children.
He made his first profits in the early part of his career by buying companies that were trading less than their net assets. That is to say, the price of all the stock in the market is less than the net realisable value of the company’s assets (net realisable value = funds collected when total assets are sold – total value of liabilities eg taxes, debt). (more…)
