1 post tagged Warren Buffett

I recently finished Roger Lowenstein’s Buffett: The Making of An American Capitalist.  As far as biographies go, it’s one of the best I’ve read.  The most intriguing thing about Buffett is his business genius, and this book does a good job focusing on it.  For a more detailed story of his personal life, I hear The Snowball is the way to go.

What I find most interesting about Buffett is his ability to breakdown complex problems and explain them in simple terms.  I also found striking similarities between Buffett’s investment style and USV’s approach to venture capital, particularly slow capital.  (Granted, Buffett wouldn’t be happy with the rule of 1/3’s.)  There’s a lot of overlap in understanding businesses, the people who run them, their respective markets and competitors, and focusing on one’s area of expertise.

Here are some of Buffett’s guides to picking stock:

• Pay no attention to macroeconomic trends or forecasts, or to people’s predictions about the future course of stock prices.  Focus on long-term business value - on the size of the coupons down the road.
• Stick to stocks within one’s “circle of competence.”
• Look for managers who treated the shareholders’ capital with ownerlike care and competence.
• Study prospects - and their competitors - in great detail.  Look at raw data, not analysts’ summaries.
• When you have conviction about a stock, show courage and buy a ton of it.

A lot of these points seem intuitive.  Do your research, know your shit, trust your gut, and go for it.  The book covers a lot more minutia in his approach to investing - working with CEOs, hands-on approach, field research, relationships with business and political leaders - but these are the prevailing themes and they should be applied to more than just picking stock.