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19-02-2012, 09:10 AM
The Straits Times
Feb 19, 2012
book review
A Buffett book for novices
The latest addition to Buffettology has few fresh insights
By Andy Mukerjee
Kinokuniya has more books about Mr Warren Buffett than my neighbourhood Cold Storage has red wines.
And yet, the market seems to be forever hungry for more. Having already taken us on seven trips into the mind of the legendary investor, his one-time daughter-in-law Mary Buffett has offered us one more foray.
The new book has a simple premise. Berkshire Hathaway, the investment company run by Mr Buffett, one of the world's most consistently successful - and certainly the richest - stock-picker, has large stakes in many businesses. Can we apply Mr Buffett's investment philosophy and see why owning these shares makes sense? In the process, can we learn more about how to invest our own money?
The authors take 17 companies in which Berkshire has holdings, which range from American Express to Coca-Cola to Walmart to Washington Post, and in each case, they apply Mr Buffett's technique of valuing the shares of these companies as though they were bonds that paid interest.
These case studies make up the core of the book, preceded by a breezy introduction to how Mr Buffett got into the investing game, how he stopped chasing basement bargains of the kind favoured by his guru, the redoubtable value investor Benjamin Graham, and how he turned his attention to companies with a 'durable competitive advantage'.
A short final chapter gives readers a glimpse into the investing style of Mr Buffett's trusted partner, Mr Charlie Munger, and the newly hired portfolio managers, Mr Todd Combs and Mr Ted Weschler.
The last chapter is a sideshow, and those already familiar with the basic tenets of Mr Buffett's investment philosophy might want to skip the introduction and dive straight into the case studies.
Those about to start their foray into the investing world might find the techniques described in this section useful. The book does a good job of explaining, step by step, the calculations, which are simple enough to begin with.
The greatest drawback of these case studies is that they lack substance. If it was the authors' intention to give a rather skimpy account of a business before beginning to analyse it as an 'investment case', then they succeeded admirably.
However, readers looking for a little bit more flesh around the bones will be disappointed. In the six pages devoted to Coca-Cola's rich history, competition from PepsiCo is not even mentioned once.
The two-page discussion of the history and business of Moody's, a 103-year-old rating agency, doesn't touch on the sub-prime meltdown at all - or its probable impact on the future cash flows of companies that earned disrepute by assigning high credit ratings to mortgage-backed securities that later became worthless.
Thanks to the ongoing sovereign debt debacle in Europe, some politicians and policymakers have demanded that rating agencies take a less important role in the financial ecosystem.
Does Moody's still have a durable competitive advantage? The authors do not answer that question.
The book also suffers from sloppy proofreading (pages 11, 22 and 147) and lazy editing. The phrase, 'The next question is', appears at least 13 times. The stilted language makes the book a tedious read.
Nevertheless, none of these shortcomings can mar the 'Buffettology' juggernaut that the two authors set rolling in 1997 with a book of the same name. If nothing else, this eighth instalment in the series proves Mr Buffett's point that if you find a good franchise, you should hold on to it.
Just as every new generation discovers for itself the taste of Oreo cookies, every new cohort of investors in the past 30 years has been drawn to the wisdom of the Sage of Omaha, bolstering the franchise. 'Buffettology' is now a pretty valuable brand name, which the authors last year licensed to a fund management company in Britain.
Won't the Buffett franchise run out of things to say? I wouldn't bet on it. Nor, I suspect, will Mr Buffett, or the store manager at Kinokuniya.
andym@sph.com.sg
The hardcover edition of this book is available at major bookstores at $40.66.
Feb 19, 2012
book review
A Buffett book for novices
The latest addition to Buffettology has few fresh insights
By Andy Mukerjee
Kinokuniya has more books about Mr Warren Buffett than my neighbourhood Cold Storage has red wines.
And yet, the market seems to be forever hungry for more. Having already taken us on seven trips into the mind of the legendary investor, his one-time daughter-in-law Mary Buffett has offered us one more foray.
The new book has a simple premise. Berkshire Hathaway, the investment company run by Mr Buffett, one of the world's most consistently successful - and certainly the richest - stock-picker, has large stakes in many businesses. Can we apply Mr Buffett's investment philosophy and see why owning these shares makes sense? In the process, can we learn more about how to invest our own money?
The authors take 17 companies in which Berkshire has holdings, which range from American Express to Coca-Cola to Walmart to Washington Post, and in each case, they apply Mr Buffett's technique of valuing the shares of these companies as though they were bonds that paid interest.
These case studies make up the core of the book, preceded by a breezy introduction to how Mr Buffett got into the investing game, how he stopped chasing basement bargains of the kind favoured by his guru, the redoubtable value investor Benjamin Graham, and how he turned his attention to companies with a 'durable competitive advantage'.
A short final chapter gives readers a glimpse into the investing style of Mr Buffett's trusted partner, Mr Charlie Munger, and the newly hired portfolio managers, Mr Todd Combs and Mr Ted Weschler.
The last chapter is a sideshow, and those already familiar with the basic tenets of Mr Buffett's investment philosophy might want to skip the introduction and dive straight into the case studies.
Those about to start their foray into the investing world might find the techniques described in this section useful. The book does a good job of explaining, step by step, the calculations, which are simple enough to begin with.
The greatest drawback of these case studies is that they lack substance. If it was the authors' intention to give a rather skimpy account of a business before beginning to analyse it as an 'investment case', then they succeeded admirably.
However, readers looking for a little bit more flesh around the bones will be disappointed. In the six pages devoted to Coca-Cola's rich history, competition from PepsiCo is not even mentioned once.
The two-page discussion of the history and business of Moody's, a 103-year-old rating agency, doesn't touch on the sub-prime meltdown at all - or its probable impact on the future cash flows of companies that earned disrepute by assigning high credit ratings to mortgage-backed securities that later became worthless.
Thanks to the ongoing sovereign debt debacle in Europe, some politicians and policymakers have demanded that rating agencies take a less important role in the financial ecosystem.
Does Moody's still have a durable competitive advantage? The authors do not answer that question.
The book also suffers from sloppy proofreading (pages 11, 22 and 147) and lazy editing. The phrase, 'The next question is', appears at least 13 times. The stilted language makes the book a tedious read.
Nevertheless, none of these shortcomings can mar the 'Buffettology' juggernaut that the two authors set rolling in 1997 with a book of the same name. If nothing else, this eighth instalment in the series proves Mr Buffett's point that if you find a good franchise, you should hold on to it.
Just as every new generation discovers for itself the taste of Oreo cookies, every new cohort of investors in the past 30 years has been drawn to the wisdom of the Sage of Omaha, bolstering the franchise. 'Buffettology' is now a pretty valuable brand name, which the authors last year licensed to a fund management company in Britain.
Won't the Buffett franchise run out of things to say? I wouldn't bet on it. Nor, I suspect, will Mr Buffett, or the store manager at Kinokuniya.
andym@sph.com.sg
The hardcover edition of this book is available at major bookstores at $40.66.
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
