Applying Buffett′s principles to technology and international investing From the bestselling author of The Warren Buffett Way and The Warren Buffett Portfolio comes The Essential Buffett: Timeless Principles for the New Economy . In this fresh take on Buffett′s irrefutable investment methods, Robert Hagstrom shows readers how to apply Buffett′s principles to technology and international investing using real–life case studies of successful fund managers like Legg Mason′s Bill Miller. Following the Buffett model, Hagstrom explains Buffett′s four timeless principles: 1) analyze a stock as a business; 2) demand a margin of safety for each purchase; 3) manage a focus portfolio; 4) protect yourself from the speculative and emotional forces of the market. Then Hagstrom shows how Buffett′s thinking can be applied in the new economy, addressing technology investing, international investing, small cap stocks, and socially responsible investing. Perhaps most valuable are Hagstrom′s insights into the psychology behind Buffett′s focus investing. For the first time, we are given sure–fire guidelines on how to become a winning Buffett disciple. The Essential Buffett will include convenient sidebars featuring key Buffett ideas, enabling readers to quickly compare Buffett′s fundamental tenets.
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"A comprehensive primer on applying Buffett′s investment strategy to the new economy." ( Fortune , April 30, 2001)
From the Inside Flap
For a while, with day traders and speculators driving the stock market to unprecedented heights—and redefining the concept of investing in real time—Warren Buffett’s measured, buy–and–hold value philosophy seemed as quaint as an old adding machine. Buffett himself lamented that his investors would have done just as well if he had gone to the movies instead of the office. But the madness is over. As the smoke clears Buffett’s timeless investment strategies are looking smarter than ever.
In this book, Robert G. Hagstrom helps you draw on the wisdom and counsel of Warren Buffett to succeed in today’s challenging market. Picking up where his previous bestselling books on Buffett—The Warren Buffett Way and The Warren Buffett Portfolio—left off, Hagstrom explains how Buffett analyzes companies and selects stocks. He then shows you how these techniques can be applied to technology, small–cap, and international stocks— areas Buffett traditionally has not explored.
Buffett built a multibillion–dollar business empire by confidently following a course that often put him at odds with Wall Street trends. The Essential Buffett outlines the core principles that you will want to incorporate into every stock decision you make:
- Invest in a business, not a stock—you’ll look at a company’s economics as if you were taking over as CEO tomorrow
- Demand a margin of safety for each purchase—how to keep risk at a minimum
- Manage a focus portfolio—a comprehensive portfolio strategy, used with spectacular results by Buffett, which focuses the investment process on a few outstanding companies
- And protect yourself from the speculative and emotional forces of the market—a lesson thousands of investors have now come to appreciate the hard way
The Essential Buffett shows you how Buffett’s framework can reliably guide your investments in today’s economy.
Investors today are bombarded with information. But understanding is still a scarce resource. To understand and practice the real rules of investing, you’ll find no better touchstone than the essential tenets developed by Warren Buffett and laid out in this book. --This text refers to an out of print or unavailable edition of this title.
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Forty-five years ago, Warren Buffett began a career managing money. Read the first page
Front Cover | Copyright | Table of Contents | Excerpt | Index | Back Cover
Forty-five years ago, Warren Buffett began a career managing money. Read the first page
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Customer Reviews
Most Helpful Customer Reviews
6 of 6 people found the following review helpful
Format:Hardcover
The definitive book on Warren Buffett has yet to be written. Perhaps only Mr. Buffett can do so, and he has no incentive in this direction. Interestingly, the more Mr. Buffett's performance weakens versus the market, the more books come out focusing on his methods. Mr. Buffett writes about his thinking in his annual reports of Berkshire Hathaway, speaks about it at his annual meetings, and occasionally shares ideas with reporters. Conclusions about his methods then are a distillation of these sources, much like the CIA used to interpret what the Soviet's thought by reviewing Pravda. The results are probably about as accurate. My main complaint about this book is that Mr. Buffett does not and probably will not invest in the new economy. And for good reasons. It doesn't fit his investing standards. So a book that takes the principles and applies them in that direction is misleading at best, and I suggest you decide what you want to call it at worst.
If you want to read a good book about Mr. Buffett, I suggest that you read How to Think Like Benjamin Grapham and Invest Like Warren Buffett. That volume covers much of the same ground as here, but does so better. It also is more accurate in characterizing Mr. Buffett's philosophy, as I understand it. You can read my review of that book.
If you have read Mr. Hagstrom's book, The Warren Buffett Way, you probably don't need to read this one as well. Let me summarize some of the key points so you can decide. Here are the principles in the book, as I have paraphrased them:
(1) Think about a stock investment like you are buying the whole business.
(2) Give yourself a large margin of safety when you buy, picking a time when a stock is depressed well below its economic value.
(3) Hold few stocks and think about their current and future fundamentals constantly to see if your assumptions are holding.
(4) Avoid speculation at all costs.
The tenets of The Warren Buffett Way are repeated here:
Business Tenets
(a) "Is the business simple and understandable?"
(b) "Does the business have a consistent operating history?"
(c) "Does the business have favorable long-term prospects?"
Management Tenets
(a) "Is the management rational?"
(b) "Is management candid with shareholders?"
(c) "Does management resist the institutional imperative?"
Financial Tenets
(a) "Focus on return on equity, not earnings per share."
(b) "Calculate owner earnings." This is essentially free cash flow.
(c) "Look for companies with high profit margins."
The reported reason Mr. Buffett does not buy technology stocks is because he feels the long-term prospects are too murky. He is probably right in most circumstances. Technology companies are usually about as successful as their new products. How can you know how good they will be versus the competition 10 years from now?
The fundamental premise of a book like this is also questionable in another way. If you want to get Warren Buffett's results, you can simply own Berkshire Hathaway stock while Mr. Buffett is alive.
For most people, indexed mutual funds are a better choice. I suggest that you read John Bogle's Common Sense on Mutual Funds to learn the argument for that approach. If 90 percent of the pros cannot beat the market, can you expect to do better?
After you read this book, also think about where modeling of a famous person's behavior might not capture what you want to learn. For example, can an actor distill her or his approach into a few principles and tenets? Yes, but that distillation wouldn't allow you to duplicate the results.
Take your money seriously, and keep focusing on how to keep it safe as your first investment priority. Avoiding losses is a key Buffett principle that has served him and his investors well.
By Fernando
Format:Paperback
Althought I dont have a very deep knowledge of Finantial Markets, this book provided me an astonishing insight into Buffet's market principles that, in the end, are common-sense rules that our fast-track lives don't allow us to see. A great and inspiring book.
Most Helpful Customer Reviews on Amazon.com (beta)
Amazon.com:
3.8 out of 5 stars
14 reviews
102 of 106 people found the following review helpful
4.0 out of 5 stars
Misleading Premise for the Book Reduces Its Value
2 April 2001
By Donald Mitchell
- Published on Amazon.com
Format:Hardcover
The definitive book on Warren Buffett has yet to be written. Perhaps only Mr. Buffett can do so, and he has no incentive in this direction. Interestingly, the more Mr. Buffett's performance weakens versus the market, the more books come out focusing on his methods. Mr. Buffett writes about his thinking in his annual reports of Berkshire Hathaway, speaks about it at his annual meetings, and occasionally shares ideas with reporters. Conclusions about his methods then are a distillation of these sources, much like the CIA used to interpret what the Soviet's thought by reviewing Pravda. The results are probably about as accurate. My main complaint about this book is that Mr. Buffett does not and probably will not invest in the new economy. And for good reasons. It doesn't fit his investing standards. So a book that takes the principles and applies them in that direction is misleading at best, and I suggest you decide what you want to call it at worst.
If you want to read a good book about Mr. Buffett, I suggest that you read How to Think Like Benjamin Grapham and Invest Like Warren Buffett. That volume covers much of the same ground as here, but does so better. It also is more accurate in characterizing Mr. Buffett's philosophy, as I understand it. You can read my review of that book.
If you have read Mr. Hagstrom's book, The Warren Buffett Way, you probably don't need to read this one as well. Let me summarize some of the key points so you can decide. Here are the principles in the book, as I have paraphrased them:
(1) Think about a stock investment like you are buying the whole business.
(2) Give yourself a large margin of safety when you buy, picking a time when a stock is depressed well below its economic value.
(3) Hold few stocks and think about their current and future fundamentals constantly to see if your assumptions are holding.
(4) Avoid speculation at all costs.
The tenets of The Warren Buffett Way are repeated here:
Business Tenets
(a) "Is the business simple and understandable?"
(b) "Does the business have a consistent operating history?"
(c) "Does the business have favorable long-term prospects?"
Management Tenets
(a) "Is the management rational?"
(b) "Is management candid with shareholders?"
(c) "Does management resist the institutional imperative?"
Financial Tenets
(a) "Focus on return on equity, not earnings per share."
(b) "Calculate owner earnings." This is essentially free cash flow.
(c) "Look for companies with high profit margins."
The reported reason Mr. Buffett does not buy technology stocks is because he feels the long-term prospects are too murky. He is probably right in most circumstances. Technology companies are usually about as successful as their new products. How can you know how good they will be versus the competition 10 years from now?
The fundamental premise of a book like this is also questionable in another way. If you want to get Warren Buffett's results, you can simply own Berkshire Hathaway stock while Mr. Buffett is alive.
For most people, indexed mutual funds are a better choice. I suggest that you read John Bogle's Common Sense on Mutual Funds to learn the argument for that approach. If 90 percent of the pros cannot beat the market, can you expect to do better?
After you read this book, also think about where modeling of a famous person's behavior might not capture what you want to learn. For example, can an actor distill her or his approach into a few principles and tenets? Yes, but that distillation wouldn't allow you to duplicate the results.
Take your money seriously, and keep focusing on how to keep it safe as your first investment priority. Avoiding losses is a key Buffett principle that has served him and his investors well.
17 of 20 people found the following review helpful
1.0 out of 5 stars
Groan
14 May 2003
By A Customer
- Published on Amazon.com
Format:Hardcover
Instead of calling this book "The Essential Buffett", Hagstrom should have called it "The Rehashed Buffett". I have read both of the author's previous books about Buffett, and they stand well on their own. This book, though, is just a cash grab. It is "essentially" just highlights from the other two books recycled into this "new" book.
If you haven't read the first two books should you read this one? I don't know... but if you have read the first two, don't bother with this patch job.
6 of 8 people found the following review helpful
4.0 out of 5 stars
Few new ideas following "The Warren Buffet Way"
3 Sep 2001
By Alberto Sandoval Criado
- Published on Amazon.com
Format:Hardcover
Robert Hagstorm re-states the great principles included in his outstanding book "The Warren Buffet Way", adding references to the new economy just in the last chapter with a few recommendations.
I am a true believer in the doctrine taught in the three books by Hagstorm, and they opened a whole new field to me. But his first book remains the best. I put it in practice with excellent personal results so far.
›
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3.8 out of 5 stars
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