The Essential Buffett: Timeless Principles for the New Economy

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#1
Editorial Reviews taken from Amazon

[Image: the_essential_buffet.jpg]

Amazon.com Review
Of all the Buffett watchers in the investment world, Robert Hagstrom, author of The Warren Buffett Way, The Warren Buffett Portfolio, and Latticework, is perhaps the best at distilling the investment wisdom of the Oracle of Omaha. In The Essential Buffett, Hagstrom conducts a thorough review of Buffett's philosophy of "focus investing" and then applies it to investment in sectors that Buffett himself usually ignores: technology and international stocks. Written in a style that's accessible to all levels of investors, The Essential Buffett not only serves as a great introduction to Warren Buffett but offers an innovative way to apply focus investing to the New Economy. --Harry C. Edwards --This text refers to the Hardcover edition.

Review
"A comprehensive primer on applying Buffett's investment strategy to the new economy." (Fortune, April 30, 2001)

Review by a guy called Professor Donald Mitchell "Jesus Loves You!"

The definitive book on Warren Buffett has yet to be written. Perhaps only Mr. Buffett can do so, and he has no incentive in this direction. Interestingly, the more Mr. Buffett's performance weakens versus the market, the more books come out focusing on his methods. Mr. Buffett writes about his thinking in his annual reports of Berkshire Hathaway, speaks about it at his annual meetings, and occasionally shares ideas with reporters. Conclusions about his methods then are a distillation of these sources, much like the CIA used to interpret what the Soviet's thought by reviewing Pravda. The results are probably about as accurate. My main complaint about this book is that Mr. Buffett does not and probably will not invest in the new economy. And for good reasons. It doesn't fit his investing standards. So a book that takes the principles and applies them in that direction is misleading at best, and I suggest you decide what you want to call it at worst.

If you want to read a good book about Mr. Buffett, I suggest that you read How to Think Like Benjamin Grapham and Invest Like Warren Buffett. That volume covers much of the same ground as here, but does so better. It also is more accurate in characterizing Mr. Buffett's philosophy, as I understand it. You can read my review of that book.

If you have read Mr. Hagstrom's book, The Warren Buffett Way, you probably don't need to read this one as well. Let me summarize some of the key points so you can decide. Here are the principles in the book, as I have paraphrased them:

(1) Think about a stock investment like you are buying the whole business.

(2) Give yourself a large margin of safety when you buy, picking a time when a stock is depressed well below its economic value.

(3) Hold few stocks and think about their current and future fundamentals constantly to see if your assumptions are holding.

(4) Avoid speculation at all costs.

The tenets of The Warren Buffett Way are repeated here:

Business Tenets

(1) "Is the business simple and understandable?"

(2) "Does the business have a consistent operating history?"

(3) "Does the business have favorable long-term prospects?"

Management Tenets

(1) "Is the management rational?"

(2) "Is management candid with shareholders?"

(3) "Does management resist the institutional imperative?"

Financial Tenets

(1) "Focus on return on equity, not earnings per share."

(2) "Calculate owner earnings." This is essentially free cash flow.

(3) "Look for companies with high profit margins."

The reported reason Mr. Buffett does not buy technology stocks is because he feels the long-term prospects are too murky. He is probably right in most circumstances. Technology companies are usually about as successful as their new products. How can you know how good they will be versus the competition 10 years from now?

The fundamental premise of a book like this is also questionable in another way. If you want to get Warren Buffett's results, you can simply own Berkshire Hathaway stock while Mr. Buffett is alive.

For most people, indexed mutual funds are a better choice. I suggest that you read John Bogle's Common Sense on Mutual Funds to learn the argument for that approach. If 90 percent of the pros cannot beat the market, can you expect to do better?

After you read this book, also think about where modeling of a famous person's behavior might not capture what you want to learn. For example, can an actor distill her or his approach into a few principles and tenets? Yes, but that distillation wouldn't allow you to duplicate the results.

Take your money seriously, and keep focusing on how to keep it safe as your first investment priority. Avoiding losses is a key Buffett principle that has served him and his investors well.
Specuvestor: Asset - Business - Structure.
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#2
I had read this book recently, and read several rounds on the few chapters of the book in the last 2 weeks.

Chapter 8: New Opportunities, Timeless Principles
I am digesting the rationality of applies Buffett's principles to non-classic territories i.e. technologies industrial and etc.

Is there any new insight i can extract to explain my doubts on analysis of ShengShong and Maxi-Cash? I am seriously thinking our analysis of companies like ShengShong and Maxi-Cash are too pessimistic i.e. under-estimated its intrinsic value.

Chapter 7: The Emotional Side of Money
I had revised the topic of emotional impacts on investment, and of course the behavioral finance. Each time i revised, i tend to get a better insight on the topic
“夏则资皮,冬则资纱,旱则资船,水则资车” - 范蠡
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#3
Hmm... Maybe I should go read again. Went to check and only have very brief notes made,

Chapter 3 (Page 47 - 76)

Essential Graham
- A true investment is that which thorough analysis shows will offer both safety of principal and a satisfactory return. Anything less is speculation.
- When a stock is priced well below its intrinsic value, a margin of safety automatically exists.

Essential Fisher
- Investment success depends on finding companies that can sustain above-average growth, in both sales and profits, over a period of several years. Short-term results are deceptive.
- Superior management is the key to superior market performance.
- Owning a few outstanding companies is better than owning a large number of average ones. Among other advantages, it simplifies your research time.

Essential Munger
- Look for companies that generate high cash earnings and require low capital expenditures.
- It is far better to pay a fair price for a geat company than a great price for a fair company.



There's also another book by the same author, 'The Warren Buffett Way' where most of the contents overlap.
Luck & Fortune Favours those who are Prepared & Decisive when Opportunity Knocks
------------ 知己知彼 ,百战不殆 ;不知彼 ,不知己 ,每战必殆 ------------
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#4
(26-07-2012, 11:29 AM)KopiKat Wrote: Hmm... Maybe I should go read again. Went to check and only have very brief notes made,

Chapter 3 (Page 47 - 76)

Essential Graham
- A true investment is that which thorough analysis shows will offer both safety of principal and a satisfactory return. Anything less is speculation.
- When a stock is priced well below its intrinsic value, a margin of safety automatically exists.

Essential Fisher
- Investment success depends on finding companies that can sustain above-average growth, in both sales and profits, over a period of several years. Short-term results are deceptive.
- Superior management is the key to superior market performance.
- Owning a few outstanding companies is better than owning a large number of average ones. Among other advantages, it simplifies your research time.

Essential Munger
- Look for companies that generate high cash earnings and require low capital expenditures.
- It is far better to pay a fair price for a geat company than a great price for a fair company.



There's also another book by the same author, 'The Warren Buffett Way' where most of the contents overlap.

I had read both, there are some overlap, but i would say not most. This book provides extra "info" vs typical Buffett's book.

If interested, the book is available in public library (332.6 HAG)
“夏则资皮,冬则资纱,旱则资船,水则资车” - 范蠡
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#5
Buffett worked very hard, is very shrewd, was lucky (we all need some of that), and was able to parlay great early wins into a fortune with some fantastic contacts... Yes, investment is well-assisted with his rolodex of CEO's and academics who can offer an insight through a phone call. While not insider trading, i'd never suggest that, there's just not many moves that would come as a surprise to ol' Wazza.
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