The Essays of Warren Buffett are nothing more than an organized compilation of the Berkshire Hathaway annual Chairman’s letters to shareholders. Hear directly from someone many consider to be the greatest investor of all time.
But if you are looking for a short cut to learning about investing don’t even bother with this book. But if you love investing and want to become great, keep reading.
Buffett says value investing is like an inoculation.
Lawrence Cunningham begins by stating that Warren Buffet’s letters to the shareholders of Berkshire Hathaway Inc., which he has selected and arranged for this volume, provide in clear language an exceptional education on the basic principles of sound business practice.
Their central theme is that fundamental analysis should guide business investment, a theme discussed in regard to understanding the proper roles of managers and shareholders, finance, mergers, valuation, and accounting.
Cunningham points out that many of Buffet’s principles contradict the central dogmas of the past thirty years held in the major business schools, Wall Street, and corporate America.Buffett has applied these principles as CEO since 1964 of Berkshire Hathaway, a textile business he purchased and transformed into a holding company that came to own completely or to have substantial stock holdings in a number of profitable companies.(In 1988 nearly 75% of Berkshire’s total net worth was concentrated in three companies: GEICO, The Washington Post, and Capital Cities/ABC.) Buffett’s business principles are what he calls “owner-related”: he considers the shareholders as owners for whom he and Charlie Munger, his managing partner at Berkshire, work to serve their interests, and he gives the managers of the constituent companies held by Berkshire the kind of autonomy they would have were they the actual owners.In acquiring such, whether they are complete companies or large share portions, he insists on the importance of a margin of safety: the price paid should not exceed value.In the selections making up this chapter, Buffett applies his principles to various investment categories areas that fulfill the criteria of being both understandable and offering good deals.Providing clarity on “Mergers and Acquisitions,” Buffett makes the point that shareholders of the acquiring companies frequently are losers when companies combine.Finally, in the last two sections, devoted to accounting matters, Buffett discusses the proper use of financial information.In an extended “Owner’s Manual” provided for Berkshire shareholders—the first selection in this chapter—Buffett summarizes his basic business principles, elaborated in much greater detail throughout the book.As the chief manager of Berkshire, he stresses here his role as a partner with the shareholders and asserts that his interest is identical with theirs: the long-term progress of the companies Berkshire holds.Eventually, Buffett knows, the market will validate their decisions.Investment decisions, rather than being based on opinions about short-term market prospects, instead should reflect judgments about long-term prospects of specific companies.