Buy A Business, Not A Stock

After thinking for a moment, the prospector asked if he could just say four words to the present occupants. On being allowed, he cupped his hands and yelled: Oil discovered in hell. Immediately all oil men marched out to head for the nether regions. St. Peter then invited the prospector to move in, but he refused. I think I too will go along. Who knows, there may be some truth in the rumour after all.

The absence of rationality among the well-trained, experienced professionals who play the stock market is a perplexing fact of our age. Warren Buffett represents a rational voice in the midst of the chaos created by the complex investment whims that pass as theories.

 

Warren Buffett earned a personal net worth of more than $10 billion through investment in stocks and securities. Not surprisingly, he became Americas leading investment authority. His performance record as an investor, ranging over four decades, is enviable. This book explains the logic that Buffett followed in many years of his career as investor.

By itself, the theme of the book would have been extremely boring. What makes the book interesting is, apart from the writing style, the fact that it vividly brings out the shocking simplicity of Buffetts strategy. The narration surrounging the many companies in which he invested, their growth and Buffetts way of looking at them is highly readable.

Buffett derived his investment philosophy from Benjamin Graham and Philip Fisher, both noted financial analysts of their time. Curiously, both differed in their approach to a significant degree. Graham, a quantitative analyst, believed only in those factors that could be measured.

Fisher, as an antithesis, would look at factors that enhanced the value of a company: future prospects and the management capability. Buffett synthesised the two after some costly mistakes in the beginning of his career. In the process, he was able to distance himself from the emotional forces of the stock market.

The stocks in which Buffett heavily invested were the Washington Post Company, Geico Corporation, Capital Cities/ABC, Coca-cola, RJR Nabisco, Salomon Inc, American Express, Gillette, General Dynamics, Guiness, Wells Fargo, Walt Disney - all companies where he held his investment for decades and earned unusually high returns. And what is Buffett strategy? It is best described in four steps: turn off the stock market; dont worry about the economy; buy a business, not a stock; and manage a portfolio of businesses.

On the whole, the book provides interesting insights into the mind of one of the most successful investors of our times. And it could easily provide a few tips to any reader interested in stock market and in making money.