Synopses & Reviews
is the first book from someone who, thanks to personal and professional access to Warren Buffett, has been uniquely positioned to learn from the master. Mary Buffett had the privilege -- during her twelve years as his daughter-in-law -- of sharing some of this very private genius's informal discussions of his investing philosophy, and now she shares some of her invaluable observations with us.
This breakthrough book offers a full-blown explanation of how Buffett uses Business Perspective Investing as a wealth-building tool. His strategy is not so much to "pick stock" but to search for and invest in excellent companies whose intrinsic value and potential earnings he can reasonably predict through a series of steps we learn about throughout the book.
Citing many fascinating case histories and examples, Buffettology shows us what kinds of companies Buffett looks for and why, and which he avoids and why. The authors show us the mathematical models and equations Buffett uses to determine the basic value and earnings potential of his final choices (and the right price to pay, for which he is willing to wait). We also learn how with the aid of an inexpensive, widely available handheld calculator, anyone can do similar equations.
In addition to providing such in-depth analysis, this book offers two more firsts. One is a chapter on Buffett's rarely discussed and extremely successful arbitrage operations. The book gives us the arbitrage equation he uses to determine the positions he should take. The other is a comprehensive list and brief analysis of fifty-four companies in which Buffett has invested and the authors believe he continues to follow, many of which have never before been publicly identified as "Buffett companies."
The first book to reveal what the public really wants to know about billionaire investor Warren Buffett -- the mystique behind his investment decisions and a list, never before published, of 50 companies that Buffett himself has invested in and which the authors believe he continues to follow.
Mary Buffett and David Clark have had privileged insight into Warren Buffett's investment strategies, and in Buffettology they spell out the key concepts that make his technique -- Business Perspective Investing -- so rewarding.
Steering dear of speculation, Buffett makes long-term investments only in companies whose future earnings he can reasonably predict. Buffettology explains what he looks for when evaluating a company, how his methods differ from prevailing Wall Street wisdom, and why following the Buffett method means focusing as much on what and when not to buy as what and when to buy. Along the way, readers will learn that the worst reason to own a stock is the belief that its price will go up next week, that diversification isn't necessarily a smart investment move (and shopping at the supermarket is), that a $1,500-per-share stock may be cheap and a $2.00 stock expensive, and much more.
About the Author
Mary Buffett brings us a unique look into the realm of the legendary Warren Buffett. As wife of his son, Peter, and a member of the family for twelve years, she was able to watch and learn from the world's most famous investor. Thanks to her business acumen, she is presently CEO of a multi-million-dollar-a-year film editing company in Santa Monica, California, where she lives.
Table of Contents
PART I: THE ART OF BASIC BUFFETTOLOGY
1. Before You Begin This Book
2. How to Use This Book
4. Investing from a Business Perspective
5. What Is Businesslike Investing?
6. Warren's View of Earnings
7. The Price You Pay Determines Your Rate of Return
8. The Corporation, Stocks, Bonds -- a Few Useful Explanations
9. Valuing a Business
10. The Only Two Things You Need to Know About Business Perspective Investing: What to Buy -- and at What Price
11. What We Can Learn from Warren's Secret Weapon: The Magic of Compounding
12. Determining What Kind of Business You Want to Own
13. The Theory of an Expanding Intrinsic Value
14. The Mediocre Business
15. How to Identify the Excellent Business -- the Key to Warren's Good Fortune
16. Nine Questions to Help You Determine If a Business Is Truly an Excellent One
17. Where to Look for Excellent Businesses
18. More Ways to Find a Company You Want to Invest In
19. What You Need to Know About the Management of the Company You May Invest In
20. When a Downturn in a Company Can Be an Investment Opportunity
21. How Market Mechanics Whipsaw Stock Prices to Create Buying Opportunities
23. Inflation and the Consumer Monopoly
24. A Few Words on Taxation
25. The Effects of Inflation and Taxation on the Rate of Return, and the Necessity to Obtain a 15% Return on Your Investment
26. The Myth of Diversifications Versus the Concentrated Portfolio
27. When Should You Sell Your Investments?
28. Warren's Different Kinds of Investments
PART II: ADVANCED BUFFETTOLOGY
29. The Analyst's Role in Ascertaining Earning Power
30. The Mathematical Tools
31. Test #1, to Determine at a Glance the Predictability of Earnings
32. Test #2, to Determine Your Initial Rate of Return
33. Test #3, to Determine the Per Share Growth Rate
34. Determining the Value of a Company Relative to Government Bonds
35. Understanding Warren's Preference for Companies with High Rates of Return on Equity
36. Determining the Projected Annual Compounding Rate of Return, Part I
37. Determining the Projected Annual Compounding Rate of Return, Part II
38. The Equity/Bond with an Expanding Coupon
39. Using the Per Share Earnings Annual Growth Rate to Project a Stock's Future Value
40. How a Company Can Increase Its Shareholders' Fortunes by Buying Back the Company's Stock
41. How to Determine If Per Share Earnings Are Increasing Because of Share Repurchases
42. How to Measure Management's Ability to Utilize Retained Earnings
43. Short-Term Arbitrage Commitments
44. Bringing It All Together: The Case Studies:
Gannett Corporation, 1994
Federal Home Loan Mortgage Corporation, 1992
McDonald's Corporation, 1996
How Warren Got Started: The Investment Vehicle
46. Fifty-four Companies to Look At
47. Waiting for the Perfect Pitch Epilogue