Inside the Investments of Warren Buffett: Twenty Cases

by Yefei Lu

Since the 1950s, Warren Buffett and his partners have backed some of the twentieth century's most profitable, trendsetting companies. But how did they know they were making the right investments? What did Buffet and his partners look for in an up-and-coming company, and how can others replicate their approach?

A gift to Buffett followers who have long sought a pattern to the investor's success, Inside the Investments of Warren Buffett presents the most detailed analysis to date of Buffett's long-term investment portfolio. Yefei Lu, an experienced investor, starts with Buffett's interest in the Sanborn Map Company in 1958 and tracks nineteen more of his major investments in companies like See's Candies, the Washington Post , GEICO, Coca-Cola, US Air, Wells Fargo, and IBM. Accessing partnership letters, company documents, annual reports, third-party references, and other original sources, Lu pinpoints what is unique about Buffett's timing, instinct, use of outside knowledge, and postinvestment actions, and he identifies what could work well for all investors in companies big and small, domestic and global. His substantial chronology accounts for broader world events and fluctuations in the U.S. stock market, suggesting Buffett's most important trait may be the breadth of his expertise.

Genres: Finance, Business, Economics, Nonfiction

312 pages, Hardcover

Published August 9, 2016

Reviews

[Pratik Kothari · Rating 4 out of 5]

It talks about the various investments of Warren Buffett through his career, ranging from net-nets to merger arbitrage to good business at fair price. How his investment style shifted from analysing assets owned to earning power / franchise value. Though it only covers investments which went right (except one).

[Jonathan Isaac · Rating 3 out of 5]

Soooooo many typos.

Regarding the content, I don't have issues with the ratios or valuation techniques--it is a view of the world--but I wish the book in general was more technical. There are numerous hints Buffett gives of his valuation/analysis techniques, and it should be clearer how the author's ratios/analysis techniques apply to Buffett's process, or how they are "Buffett-esque." There probably should have been a chapter or two (or three) establishing this methodology.

[David]

Libro que describe 20 inversiones importantes de Buffett desde la perspectiva que habría tenido un “inversor privado normal” en la época de cada inversión.

Para mi, el valor de libro reside en los “principios básicos” que se pueden extraer de sus inversiones. Es imposible saber con antelación si una inversión saldrá bien o mal; la clave intentar maximizar la probabilidad de que salga bien. Para ello, cuantos más “checks positivos” haya, mayor será la probabilidad de que la inversión sea buena. Algunos de los check-lists:

A) Valoración. Comprar barato siempre que se pueda.
i) “NAV que es factible convertir en cash” vs. “Market Cap”. Cuanto más pequeña sea la diferencia, mejor. P/B también es útil, pero me gusta menos porque incluye activos con poca liquidez y cuyo valor es más incierto.
ii) PERs, EV/EBITDA, Price to FCFE no muy altos. El umbral de “no muy alto” varia en función del crecimiento de la compañía
iii) Métrica clave: Cash after CAPEX for maintenance
iv) Nota: Clave entender muy bien la contabilidad (inc. Other comprehensive income, inversiones en empresas sin controlling interest, etc.). Puede haber mucho valor “escondido”.

B)Capacidad de compounding del negocio. Tres variables a tener en cuenta: (i) ROTCE (o variaciones), (ii) coste de capital, (iii) crecimiento (top line y márgenes). Cuanto mayor sea el ROTCE, menos capital necesito para crecer. Cuanto menor sea el coste de capital, menos me cuesta ese capital que necesito para crecer. Y cuanto mayor sea el crecimiento del negocio, más compounding habrá.
i.) Comentarios sobre el ROTCE: (i) foco en el ROTCE marginal (a veces es muy distinto del ROTCE total de la empresa).
ii)Comentarios sobre el crecimiento:
1.)Buen track-record de crecimiento histórico. Más importante entender el crecimiento que “calcular el último decimal” del ROTCE
2.)Buen track-record de evolución de márgenes.
3.)Entendimiento de la industria. Pricing power / pricing wars, amenazas (importanciones, internet, tecnologías), etc. Aquí da mucho para hablar.
a. Importante que sean industrias y compañías de las que haya muchos datos objetivos.
b. Especialización en industrias. Ej Buffet en insurance
4.)Performance: ¿tiene MOAT, o es un negocio que depende mucho de su ejecución?

c. Management:
i. Track-record de operar bien
ii. Conocimiento de la empresa e industria. El annual report debe reflejar que existe este conocimiento
iii. “Value owner-managers – CEOs who are either an owner in the business or who are otherwise personally devoted or connected”
iv. Integridad
v. Incentivos alineados con KPIs con foco financiero (suelen mencionar os objetivos en el anual report). Idealmente si tienen acciones en la empresa
vi. Fearless (pero racionales)
vii. Hardworkers

[Tab Williams · Rating 2 out of 5]

I love case study books and I wanted to love this. But I didn't. There isn't much new here if you have read Making of an American Capitalist or Snowball. Truthfully, those books are more compelling in describing Buffett's investments than this book. There is a lot of armchair quarterbacking going on and makes it seem oh so easy. This was a huge miss for me and is going to be a waste of time if you know Buffett well. The only thing new was putting some of the financials into the book, but it isn't very additive.

[Abhishek Gupta · Rating 3 out of 5]

This book is not for amateurs or beginners. Though the discussion and analysis of investments of Warren Buffett has been done thoroughly, but it is difficult to arrive at some solid conclusion as to what is the common factor among all of the 20 investments of Warren Buffett from this book. It is a good go through if we want to delve into deeper concepts of fundamental analysis.
I'm definitely going to read it again.

[Jun · Rating 3 out of 5]

Some of the analysis are doubtful. But, i like the conclusion the author made after analyzing Buffett's decision. He mentioned that Buffett normally invest in company where he had information advantage. For example, Wells Fargo's annual report provided Buffett complete information to make an intelligent investment. He also realized that Buffett, in the early days, is willing to change his investment style (eg: merger arbritrage) to adapt to the market condition.

[Troy Grube · Rating 1 out of 5]

This book was WAAAY above my comprehension level. I struggled through and made it about half way but I had to abandon it after deciding that I can read the words, but I wasn't retaining any of the information. I'm sure it would be interesting to someone who can understand the layers of techo-speak but that's not me.

[Daniel Ottenwalder · Rating 3 out of 5]

Wish I could rate it higher, but it didn’t do enough for me technically and philosophically. I feel like it could of done a better job explaining certain investments buffet has made. I also feel a bunch of typos took me out of the book. I’ll try the essays of warren buffet to see if i can understand this man’s philosophy more.

[Jason Orthman · Rating 4 out of 5]

Useful contribution to the study of Warren Buffett's investment prowess. The author tries to assess each investment based on the publicly available information at the time. Near term price (valuation) often seemed to be much less of an issue than other qualitative factors.

[Asif · Rating 5 out of 5]

An exceptional book. The author has done a unique exercise which analyses Buffetts main investments over the years and brings a different level of clarity. A lot to learn from following the analysis laid out in the book.

[Mohit Choudhary · Rating 4 out of 5]

Great insights into what could have been the thought process behind these iconic investments, covering the economic landscape at that time to the strength of their individual balance sheets. Must read for any aspiring investor.

[Sander · Rating 4 out of 5]

Specialist text for security analysts that tries to recreate the thesis behind some of WEB's investments using contemporaneous information. Interesting read from a historical perspective. The author even manages to tease out a few commonalities. Good reference book. It's a keeper.

[Micah Cobb · Rating 5 out of 5]

A good introduction

This was a good book. In some cases, the analysis didn’t seem in-depth enough. It would also be a great introductory book for investors if a little more intro material to relative valuation had been included.

[David · Rating 4 out of 5]

Quite good in understanding Buffetts investments

[Chris Ginther · Rating 2 out of 5]

D

[Edward · Rating 3 out of 5]

Too complicated/technical for me rn

[Gabriele · Rating 3 out of 5]

Too technical …I was expecting another kind of book

[Ugh · Rating 3 out of 5]

Pretty interesting and somewhat useful, but not going to teach you much that general books wouldn't

[Udbhav · Rating 3 out of 5]

A light read

[J · Rating 4 out of 5]

Convenient information

[Alvin Chan · Rating 4 out of 5]

Good insights to case study. Explained case study within context and timeframe of equity investment.

[Santosh Patil · Rating 4 out of 5]

This book takes twenty of Warren Buffet's investments and analyses their business models, circumstances in which investments were made, balance sheets, and Buffet's rationale behind those.
This is the kind book a finance student or an investor would like to add to their collection and keep visiting the case studies time to time.

[Darren · Rating 4 out of 5]

A simple idea: take twenty of Warren Buffett’s past investments and expose them to deep, extensive analysis. Apart from being a fascinating retrospective, it may also give a few inklings about what makes Buffett tick and how the “Sage of Omaha” manages to hit gold with so many investment decisions.

This is no rose-tinted spectacle hagiography but a fairly neutral, informative and detailed examination, which has had access to partnership letters, company documents and lots of other original source documents. Lessons learned, mistakes possibly made and strategic advantages taken are all examined, leading to an interesting book that provides a snapshot of corporate America as well as a close focus on perhaps the world’s best-known investor. The author, a portfolio manager, selected twenty investments that he felt Buffett made over time that had the greatest material impact on his success, based on a number of factors, to provide a balanced, informative view of Buffett’s investments and he contrasts matters by taking the perspective of an investment analyst who would have studied the same businesses at the same time. Maybe this is going to be the next-best thing to sitting down with the great man himself and asking him to spill the beans…

The price of the book might put it out of reach for a casual reader, yet for those who are serious about investing or who just have an interest in corporate history and business overall, this is a very engaging read that is hard to put down. Sure, for some readers, the incredibly deep financial information may be a little bit overwhelming, yet that can be skipped with relative ease if necessary. The reader was not, in any case, left wanting!

This was certainly a pleasurable, informative way to spend a few evenings curled up with a book! Definitely a worthy consideration.

Autamme.com

[David Andrade · Rating 4 out of 5]

“Las Inversiones de Warren Buffett” de Yefei Lu establece definitivamente que el éxito extraordinario de Buffett se fundamenta en dos pilares inseparables: la investigación rigurosa con datos de alta calidad y la paciencia disciplinada en el tiempo. El libro desmonta mitos sobre la intuición o suerte como factores explicativos, revelando en cambio un proceso sistemático, analítico y profundamente fundamentado en evidencia empírica.
Lu demuestra que la investigación de Buffett nunca fue superficial o casual, sino que involucró el análisis exhaustivo de fuentes primarias, visitas a empresas, comprensión profunda de dinámicas competitivas y evaluación rigurosa de datos financieros. Esta dedicación a la calidad de los datos, combinada con la paciencia para esperar las oportunidades correctas y la perseverancia para mantener posiciones durante ciclos completos del mercado, constituye la verdadera “fórmula secreta” del Oráculo de Omaha.
Para inversores y profesionales financieros, el libro de Lu no solo proporciona insights históricos invaluables, sino que establece un estándar metodológico para la toma de decisiones de inversión. Su mensaje es claro: el éxito sostenible en los mercados financieros requiere la combinación disciplinada de investigación meticulosa y paciencia estratégica - cualidades que, aunque aparentemente simples, requieren dedicación y rigor extraordinarios para ser implementadas consistentemente a lo largo del tiempo.

[JG · Rating 4 out of 5]

What does the book offer that is any different from the rest of books and articles about Buffett? The "book focuses on what an investment analyst working at the time would have seen when considering the companies Buffett invested in",ie, the author analyzes each case without the benefit of hindsight.

He also shows that some cases weren't as obvious or cheap nor easy as everybody always says, and that Buffett combined different strategies along with a Growth focus.

These are the 20 cases:

1958: Sanborn Map Company
1961: Dempster Mill Manufacturing Company
1964: Texas National Petroleum Company (merger arbitrage)
1964: American Express
1965: Berkshire Hathaway


1967: National Indemnity Company
1972: See’s Candies
1973: The Washington Post
1976: GEICO
1977: The Buffalo Evening News
1983: Nebraska Furniture Mart
1985: Capital Cities/ ABC
1987: Salomon Inc.— Preferred Stock Investments
1988: Coca-Cola


1989: US Air Group
1990: Wells Fargo
1998: General Re
1999: MidAmerican Energy Holdings Company
2007– 2009: Burlington Northern
2011: IBM

A great book for those who love digging into financial data and study cases.

[Prasanna · Rating 4 out of 5]

Lu looks at each investment in great detail and establishes the broader context in which each investment was made. He meticulously details the history of each company, its past performance, its situation at the time Warren Buffet chose to invest in the company and the result.

Inside the Investments of Warren Buffet is an excellent resource to students of finance, specifically those who are interested in the field of investments and portfolio management. For other readers, the technical details and financial terms can prove a bit difficult to understand – unless they are ready to dig further into each.

~ http://bookreviews.infoversant.com/in...

[MM · Rating 2 out of 5]

I would not really reccomend it to prospective readers for the following reasons:
1) The analyses seem to be written from someone who is not an investment pratictioner. They are often high level and not properly structured
2) The book is written in the most boring way possible, and has plenty of typos which indicate the book was written in a rush

The limited benefits of the book are to expose the reader to some of Warren Buffett investments, to at least have a vague idea of what they are about.

Overall seems a nice way from the writer to make money out of Buffet's hailo. Nice idea, but not worth it.

[VJ · Rating 4 out of 5]

pretty good book to underdtand Buffetts plays in different eras.

[Mills College Library]

332.6 L9267 2016

[David Glad · Rating 3 out of 5]

All things considered, this was likely more for the writer's clarity of thought than as strongly for the reader's enrichment. Great for the writer, not so much so for the reader. (Kind of like if you were to meet an all-time great investor and amazingly, he could pick your brains of much of your knowledge while you perhaps are only somewhat wiser for the experience of the meeting.)

Among the amusing typos was the chapter on IBM where he wrote their capital return (dividends and share repurchases) over the years, but gave it in millions rather than billions. Grammar was a little off too, but tolerable. This implies he rushed it to press. (Consider this was a Columbia Press imprint.) Also, I think for fellow Americans, stating price to earnings (PE) ratio as PER rather than PE when you first see it in the book (did not seem a good explanation) made me think this book can be hard to follow for a novice investor.

I had just gotten through reading Warren Buffett's Ground Rules (that dealt with his partnership) and this book initially gave me high hopes on what happened with some of the companies behind his earliest investments. The book mentioned Sanborn Maps was still alive in some form, 55+ years later.. but beyond that, just seems there are better books out there for many of his investments and you are better off going with what Buffett himself wrote on these investments. (He certainly has the humility.)