Glad I read it. Glad I finished it.

Another masterpiece. There are some books of 200 pages that take me more time to read than books of 400 pages. I read and then re-read every line to ensure that I don't miss one single insight. The book more than lived up to its promise. I recommend any investor, analyst and particularly accounting professionals to read it.

180-The Essays of Warren Buffett-Warren Buffett-Essays-1998
Barack
2018/07/29
2020/06/11


- People often overestimate a change in time can bring , and underestimate the change in 10 years can bring.

"The Essays of Warren Buffett" (The Essays of Warren Buffett), first published in the United States in 1998. It contains a letter written by investment guru Warren Buffett to the shareholders of Berkshire Hathaway, covering topics such as management, investment and evaluation.

Buffett was born in Omaha, Nebraska, in 1930. He received a bachelor's degree in economics from the University of Nebraska-Lincoln and a master's degree in economics from Columbia University. Representative works: "Buffett's Letter to Shareholders", etc.

Part of the catalog
1. Corporate Governance
2. Finance and Investment
3. Investment in alternatives
4. Common stock investment
5. Mergers and acquisitions
6. Valuation and accounting
7. Accounting tricks
8. Accounting policies
9. Tax issues

Buffett was born in Obaha, Nebraska, in 1930. In 1941, he bought the first stock of his life. The stock funds came from himself and his sister. Soon after, the stock fell by 30%. For this reason, Buffett's sister often complained to Buffett for this. Eventually the stock rebounded and Buffett sold the stock with a 5% return.

This incident illustrates two things: first, when stocks fluctuate, investor sentiment is extremely vulnerable to loss aversion; second, in the long run, high-value stocks will eventually appreciate.

During his studies at Columbia Business School, Buffett was deeply influenced by investment theorist Benjamin Graham, which largely led to his persistence in value investment strategies for decades.

In 1957, when he was 27 years old, Buffett established the Buffett Investment Club. In 1962, when he was 32 years old, one million US dollars of the capital of Buffett's partner investment company belonged to Buffett. In 1968, when the U.S. stock market triumphed, Buffett liquidated almost all the stocks of the Buffett Partners he owned.
From 1970 to 1974, the U.S. stock market suffered a severe bear market, and the U.S. economy entered a period of "stagflation".

After leaving the partner company, Buffett joined Berkshire Investments. This investment experience earned Buffett the title of "stock god". Since 2000, Buffett has raised funds for the Glorious Foundation through online auctions. The reserve price starts at $50,000 to get a chance to have dinner with Buffett.

During the 42 years from 1965 to 2006, the average annual growth rate of Berkshire’s net assets reached 21.46%, a cumulative increase of 361156%; during the same period, the average annual growth rate of S&P 500 index companies was 10.4%, and the cumulative growth rate was 6,479. %.

Through simple calculations, we can know that if we want to increase assets to 10 times in 10 years, we need an average annual growth rate of 25.89%; if we want to increase assets to 20 times in 20 years, the figure is 16.15%; And Berkshire's average annual growth rate of net assets reached 21.46% in 42 years. In the long battle against S&P, Berkshire's performance has been impressive.

Benjamin Graham's investment strategy is based on company value, not market hotspots; at the same time, he puts great emphasis on the margin of safety. Philip Fisher in the risk tolerance of the degree of tolerance to比格雷厄姆higher, he tends to focus on investment in high-quality companies, his portfolio is often not more than 10 stocks, of which 30% of the stock may Accounted for 70%.

In fact, I do not equate stock trading with investing in stocks. The former hopes to obtain income in the unit of time of days, weeks, and months. In this case, investors’ decisions are easily affected by emotions rather than logic, and it is easier to buy stocks through financing transactions or increased leverage. . Borrowing money to invest in stocks is a way of over-betting, which almost determines that investors cannot ignore market fluctuations and make long-term investments. Once a small probability black swan event occurs, investors will have to be forced to sell stocks. The act of being forced to sell stocks for various reasons is often extremely risky.

The latter requires investors to overcome loss aversion, ignore short-term market fluctuations, and measure returns on a time scale of years and ten years. The value of any investment is a discount of the company's future cash flow. However, this method requires investors to have a deeper understanding of the intrinsic value of the target company, which is often difficult for non-professional investors.

In the nine investment cases given, I got the impression that as long as the target company’s products are still being used by the general population, the intrinsic value of the company should not be underestimated because of the bad news. In fact, Buffy special is precisely in those good companies often the most difficult period, large purchase of its shares.

The modern portfolio theory that I learned in the second major of finance, and the value investment theory advocated by Buffett and other Graham followers, seem to be two directions on a fork in the road. However, for non-professional investors, the former tends to be more operational; for professional investors, the latter’s returns are more attractive.

The development of artificial intelligence and the enhancement of computer computing power have made quantitative investment gradually become an investment method that attracts attention. It hopes to seize the moment of market failure through high-frequency trading, and has a very high turnover rate. Accumulate small gains to get an objective overall return. It should be regarded as a third-party investment strategy different from the above two.

" Under normal circumstances, the characteristics of a company determine the characteristics of its shareholders. As the so-called "things are gathered together, people are divided into groups." If the company pursues short-term results or short-term stock price performance, then the shareholders it attracts will also pay attention. Short-term performance. If companies treat shareholders arbitrarily, they will only get random results. The widely respected investor and writer Phil Fisher once compared the company’s strategy of attracting shareholders to a restaurant’s strategy of attracting customers. A restaurant can be positioned. For a specific class of diners-those who like fast food, those who like elegant, those who like oriental food, etc. Through the positioning of the style, a group of like-minded fans are finally obtained. If the restaurant ’s service, menu, and price level strategies are appropriate, then this group Customers will become regular repeat customers. But if the restaurant often changes styles, then these happy and stable customers will disappear. If the restaurant's positioning is vacillating between French cuisine and takeaway chicken, it will definitely confuse repeat customers, and eventually Leave. "

There is no such thing as the best model in this world. Each company has its own style and characteristics. Therefore, they should find the path that suits them best in practice. In fact , no matter which path they choose, they will eventually form a stable support group. This group may be large or small. But there will always be such a support group .

" In 1983, I summarized 13 corporate principles related to owners, and believed that they would help new shareholders understand our management thinking. Since they are called "principles", all 13 of these principles are still valid today. . "

" 1. Although the organizational form is a corporate system, we act as partners. Munger and I regard our shareholders as our partners, and we ourselves are the managing partners (because whether it is good or not Bad, in terms of the proportion, we are all controlling partners.) We do not regard the company itself as the ultimate owner of assets, but we think that the company is just a channel through which we hold assets. Munger and I do not. you do not want to own the stock, only as a piece of paper marked with the price, and the price fluctuations of these papers every day, you might have been for some events on the economic or political anxiety, and intend to sell them at any time. We want you to see yourself as someone who truly owns part of the company’s assets for a long time, just like a farm or apartment owned by you and your family.

For us, we do not want Berkshire’s shareholders to be a group of strangers who are constantly changing. On the contrary, they are our investment partners. They entrust assets to us for management, hoping to get good returns in future life. . There is evidence that most of Berkshire’s shareholders have accepted this concept of long-term cooperation. Even if I exclude the shares I hold, among the large listed companies in the United States, Berkshire’s annual stock turnover rate is quite low. In fact, our company’s shareholders’ treatment of Berkshire is consistent with Berkshire’s treatment of the companies it invests in.

For example, as a shareholder of Coca-Cola and Gillette, Berkshire is a non-managing partner of these two outstanding companies. We measure success by the company's long-term growth, not by monthly stock price changes. In fact, we do not care at all that the stocks of these companies have not been traded or even quoted in the market for several years. If we have good long-term expectations for a stock, short-term price fluctuations are meaningless to us unless someone offers us a very attractive price. "

" 2. Most of the board members of the company regard Berkshire as their own industry, and the main part of their wealth is the value of holding company shares. In other words, we eat our own meals. Munger More than 90% of family assets are placed in Berkshire stocks, while mine is 98% to 99%. In addition, many of my relatives, such as sisters and cousins, also have a large portion of assets held Our company’s stock. Munger and I are very comfortable with putting all our eggs in the same basket, because Berkshire owns a series of diversified outstanding companies. In fact, whether it is owned The controlling rights of these companies are still minority interests. We all believe that Berkshire is a company with very good equity quality and diversity. This is unique to Berkshire.

Munger and I cannot promise you the result. But we can guarantee that as long as you are our partner, at any time, your financial assets and our own assets will fully maintain consistent growth. We have no interest in high salaries, option awards, or other things that make money from you. We just want to make money with our partners in the same proportion. Even when I make a mistake, I hope to get a little comfort from you, because I have suffered the same proportion of losses with you. "

" 3. Our long-term economic goal (the restricted part will be mentioned later) is to maximize the average annual rate of return of Berkshire’s intrinsic value per share. We do not measure economic significance or performance by company size. It is measured by the growth per share. We are sure that the growth rate per share in the future will decline-this is due to the excessive size of assets. But if our growth rate cannot exceed the average growth rate of large American companies, we Will be very disappointed. "

I tend to think that the reason most people in the world cannot succeed is not that they are not smart enough. It may often be that they are not patient enough. Even if we do things the right way, it may take some time to get the right results.

" 4. In order to achieve our goals, our first choice is to directly hold a series of diversified companies, from which we can obtain stable cash flow and continuous capital returns above the market average. Our second choice is through our insurance company , Mainly looking for stocks that are easy to trade in the market, so as to hold shares of some similar companies. The price and availability of stocks, as well as the demand for insurance funds, determine the capital allocation in any given year. In recent years, we have acquired. Some companies. Although there is no action in some years, we hope to acquire more companies in the next ten years and hope to make some large-scale acquisitions. If these acquisitions can reach our past levels, then Berkshire It will get a very good return. It is a challenge for us to generate good ideas as quickly as cash flow.

In this sense, a depressed stock market is a good thing for us. First, it allows us to use lower prices to buy the whole company; second, the market downturn makes our insurers can more easily in a tool on attractive price, buy some shares outstanding enterprises, including We already hold some of the stock companies; third, some outstanding companies, such as Coca-Cola, will continue to buy back their own stock, so they and we can buy stocks at a cheaper price. In short, Berkshire and its long-term holders will benefit from the falling stock market, just as a consumer who needs to buy daily food benefits from falling food prices. So when the market crashes, as usual, don’t worry, don’t be frustrated. This is good news for Berkshire. "

" 5. Due to the limitations of our corporate ownership methods and traditional accounting methods, the profit shown in the consolidated accounting statements cannot truly reflect our actual economic results. Munger and I are both owners and managers, and will actually ignore These data are provided by the consolidated accounting statements. However, we will report to you the income generated by the important enterprises we control and the figures we consider important. These figures, together with other information we provide, will help you to do To make a judgment. Simply put, we try to disclose the really important data and information in the annual report. Munger and I put a lot of energy into understanding the operation of the company and the business environment in which they are located.

For example, is the development of our enterprise smooth sailing or sailing against the current? Munger and I need to know exactly the market conditions and adjust our expectations accordingly. We will also tell you our conclusions. For a long time, most of the companies we invest in have achieved results that exceeded expectations. Sometimes we will also be disappointed, but whether it is happy or bad, we all explain frankly. When we make reports in a non-traditional way, we explain the concepts and explain why they are so important. In other words, we will tell you how we think. From this, you can not only judge the value of Berkshire, but also our management methods and capital allocation. "

"It is better to be approximately right than precisely wrong."

The book is a collection of essays from multiple shareholder meetings. This sometimes makes the book repetitive or lacks a straightforward narrative. Nevertheless, each essay is full of practical knowledge applicable not only to investing but also to everyday activities.

I particularly liked how Warren takes seemingly complicated things and presents them in a simple and crisp way. For example, when talking about investment bankers, he uses the metaphor, "Never ask your barber whether you need a haircut.". Also how he sketches the simile between a shopowner being happy when supplies are cheap but how most "investors" see a drop in price as something necessarily bad. When looking at the long term, all these oversimplifications make a lot of sense.

"A horse that can count to ten is a remarkable horse—not a remarkable mathematician."

Cunningham has done a wonderful job at organizing some of Buffet's most insightful essays over ten topics. With lessons ranging from effective corporate governance to assessing a company's earnings quality, anyone interested in business or investing absolutely must read this book. The book is only 300 pages, but I wouldn't plan it to be a quick read. It's worth setting aside a decent amount of time to really chew on the ideas and philosophies that The Oracle of Omaha generously presents. You'll be glad you did!

Insightful and entertaining

As expected, Buffett's writing is insightful, Interesting and inspiring. He has firm views and the record to back it up. The book beautifully arranges topics from various letters into chapters which in my view is a great way to experience Buffett's writing.

Full of insights about investing. loved it.

I thought this was all pretty good.

It's a strange compilation. Different sections from different reports in different years are arranged by topic. So, as business conditions change, the details of the advice changed. The fundamentals are always the same: Owning a business is good if the business is good and never invest because you think the price will go up rather than because the business is good.

Buffett is often funny (although some of his jokes are a little dated such that they're much less funny now than they would have been perceived when told (or earlier)) and usually makes business concepts very accessible.

Very interesting. This is like the Poor Richard's Almanac of investing: lots of common sense ideas, if no particularly brilliant insights. A lot of things went over my head--hey, I was an English major--but one of the best Buffett ideas is this: you don't have to know everything to be good at something. I'll keep this in mind moving forward.

Bought BKRB shares before I even finished reading. So good.

there are few good thoughts in this book but as for me it a bit overrated and maybe useful only for top management

This is my first book on finance and corporation.
I struggled to understand at the beginning not knowing the terms. But I eventually caught up and learnt so much much from this book. It is a great book on corporate finance. Every sentence of his made a valuable lesson to me.

There is so much to tell about what I learnt in this book but I'll give a little that I learnt quickly in few lines.

Invest in company as if you're purchasing the entire company.
Invest in a company which has a good economic in future at a sensible price.
Invest within your circle of competence.