Bibliophile Warren Buffett's Letter 1957-2017

BIBLIOPHILE WARREN
BUFFETT’S LETTER
1957-2017
JIMIT ZAVERI 1/13/19 LUCKY IDIOT
LUCKY IDIOT BIBLIOPHILE – WARREN BUFFETT’S LETTER https://jimitzaveri.wordpress.com/
Contents
1 – WARREN BUFFETT’S LETTER – 1957 - 1959 ................................................................................................... 2
4 – WARREN BUFFETT’S LETTER – 1964 – 1965 ................................................................................................ 12
10 – WARREN BUFFETT’S LETTER – 1982 ......................................................................................................... 31
11 – WARREN BUFFETT’S LETTER – 1983 – 84 .................................................................................................. 37
12 – WARREN BUFFETT’S LETTER – 1985 – 86 .................................................................................................. 43
14 – WARREN BUFFETT’S LETTER – 1988-89 .................................................................................................... 53
15 – WARREN BUFFETT’S LETTER – 1990-91 .................................................................................................... 60
18 – WARREN BUFFETT’S LETTER – 1994 – 1995 .............................................................................................. 82
20 – WARREN BUFFETT’S LETTER – 1997 – 1998 ............................................................................................ 101
24 – WARREN BUFFETT’S LETTER – 2007 ....................................................................................................... 121
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1 – WARREN BUFFETT’S LETTER – 1957 - 1959

Posted on January 1, 2018
Since I am a fan of Mr. Warren Buffett and he was highly influenced by Mr. Charlie Munger in his life; so has
my life been influenced by both the entities. Hence, today (1st January) on the birthdate of Mr. Charlie, I would
like to pay a tribute to both the entities by extracting the core content from Mr. Buffett’s letters.
Warren Buffett’s Letter - 1957
In 1957, As per Mr. Buffett, the market was above intrinsic value. Even during optimistic situations, Mr.Buffett
tried to focus on investing into the work-out situations rather than making an investment decision to general
issues. If the market status seemed undervalued; Mr.Buffett would build a portfolio of general issues and make
use of borrowed money in operations.
Mr.Buffett has explained work-out situations as investment which is dependent on the specific corporate actions
such as divestment, mergers, liquidation, demerger, tenders, etc. In such cases, risk depends on planned actions
and not on the economic scenario or the general market.
Mr.Buffett has given weightage on “the better performance in bear market than in bull market.” During general
or bull market, he was satisfied by matching his average returns.
We were able to see that everyone has generated good returns during the period of 2013-2017 by investing in
the random stocks portfolio. But, we need to sustain our returns over a longer period of time with the risk under
control. Doubled your Money in Last 3 Years ? Skill or Luck ?
Mr. Buffett emphasizes on better performance in bear market as compared to bull market and matching the
average returns during bull market scenario.
In 1958, Mr.Buffett had made an investment into the stock name "Commonwealth Trust Co. of Union City, New
Jersey". The company earned $10 of EPS but did not pay any dividends. As a result of dividend being unpaid; the
stock price was depressed and was traded at $50 per share while the company held assets worth $50 million.
25.5% of the stock was held by the larger banks.
Stock was traded at 20% of earning yield ($10/$50*100). During 1958, US interest rate was 3.50% and Mr.Buffett
counted intrinsic value of $125 in a conservative manner. Mr. Buffett had discounted EPS by 8% and made the
intrinsic value of $125, while interest rate of US in year 1958 was 3.50%.
If the merger of Commonwealth got approved with larger banks, than, Mr.Buffett had estimated $250 per share
value (i.e. discounted EPS by 4%). Mr.Buffett held 12% of the bank. Mr.Buffett got an opportunity to tender his
holding at $80 which was higher by 20% of traded price of stock. Mr.Buffett was able to identify another
attractive opportunity where he employed nearly 25% of the assets of his partnership.
He bought a higher stake in the Sanborn Map Co. and created his own work-out situations due to lack of
availability of opportunities.
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In Indian Market, We can also capture such situations for creating our wealth. End of FY13, one of the textile
company was at an enterprise value of Rs.210 crore, whose price was Rs.207 and PBT Rs.40.66 crore. So, this
stock was traded at 19.36% of earning yield (40.66/210*100). Currently this stock is traded at the price of
Rs.1320. (8% Interest rate in India and stock was at 2.42x of AAA Bond rate)
Mr.Buffett analyzed the availability of a speculative component with the risk of loss into the blue chip security
prices. This situation occurred due to evolution of new standard of valuation and people believed that new
valuation standards will be able to replace the old standards.
Mr.Buffett increased the weightage from 25% to 35% in Sanborn Map Co. and the remaining 65% was employed
in undervalued and work-out operations.
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Warren Buffett’s Letter 1960
In 1959 letter, Mr. Buffett had made an investment of 35% of net assets in the company named Sanborn Map
Co.
Maps are immensely useful to the fire insurance companies. Business is operated in the monopolistic manner
and without the need for strong sales efforts. Earlier, the insurance companies had fear for profit of Sanborn
Map and hence they placed a number of prominent insurance men to Sanborn's Board of Directors to act as a
watch-dog.
In 1959, the ratio of PAT reduced to $100000 as compared to $500000 as in the year 1930. The company began
to make investment portfolios since they did not need any further capital to run the business. Over a period of
time, their investment was accumulated to $2.5 million; of which roughly half was in bond and half in stocks.
These investment portfolios worked well but the map business lost its shine.
In year 1938, the stock was traded at $110 but the value reduced to $45 in year 1958; whereas their investment
per share value increased from $20 to $65. Hence, their stock is available for negative $20 against the investment
portfolio.
Company had sales volume of $2 million per year and they owned $7 million worth of market securities. Their
income from investment portfolio was substantial enough to take care of their company’s finance. Regular
dividends were paid to all the stock holders but there was a decrease seen in the dividend payout for a constant
of 5 times in a period of 8 years. As against this; there was no deduction in the salary of the directors.
Board of directors held a minimal position in the Sanborn shares. Buffett proposed to separate the investment
portfolio business from the map business. Hence, after the death of the president of Sanborn; his part of shares
(around 15000) were bought by Warren Buffett and another 24000 from the open market. Apart from this; there
were 2 large stock holders who held 10000 and 8000 shares respectively. They were unhappy with the current
situation of the company and they desired to accept the proposed idea of Buffett of separating the business.
Mr. Buffett wanted to work on re-establishment of earning power of the map business. On the same instance,
they got an opportunity of converting their physical goods to electronic goods which will multiply their profit for
the map business.
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Indian company example - Before 2006, the company was involved into manufacturing of scooters. But the
company discontinued to manufacture in 2006 and became an investment company with the profit that they had
made from the sales. At the end of FY2013, the market value of investment portfolio of the company was worth
Rs.2034 crore; whereas stock was traded at market capitalization of Rs.440 crore (stock price of Rs382). Currently,
the company is trading at the market capitalization of Rs.3172 crore (stock price of Rs.2775). The company is also
paying out healthy dividends.
Mr.Buffett also mentioned that no one should jump to conclusions by reviewing one year performance. One
needs to at least measure five years of performance in both strong and weak markets.
Mr. Buffett had identified few mutual funds and done a comparative performance of mutual funds with market
and with his partnership.
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We can see that Mr. Buffett has outperformed in mutual funds with a heavy margin.
Mr. Buffett used 3 method of operations as below -
1) Generals
General situation works with the market situation. The investment outperforms in the bull phase and decline
sharply in the bear phase. These investments work well in a longer period of time.
2) Work-outs
Work-out situation provides stable and safer earnings and due to that Mr.Buffett use borrowed money to take
an advantage of work-out situations. In the bear phase; we get better results and in the bullish phase; we get
bad performance.
3) Control
During 1961, Mr. Buffett owned around 70% stake of the Dempster Mill, which was a fall into a control situation
category. Initially, Dempster Mill was started as a value investment (General) category but as time passed, this
investment came under control situation when an additional stake was purchased by Mr. Buffett.
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The detailed discussion of Dempster Mill investment will be done in the later series of Warren Buffett’s letter.
Few people who wants to invest conservatively, have bought government bonds and few others bought blue
chip securities regardless of Price to Earnings ratio, dividend yield, etc. with a belief of getting benefits by
investing in the bonds.
Mr. Buffett has always emphasized on better performance during a bear market and getting similar return in a
bull market.
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Posted on February 5, 2018
Mr.Buffett has a target to an approximately 0.5% decline for each 1% decline in the market. He has always made
an emphasis on the falling less compared to the market. Also, he has never tried to predict the market direction.
Mr. Buffett has mentioned few points which we require to keep in mind –
Mr. Buffett puts emphasis on benefits of compounding and mentions that if we want to enjoy the benefits of
compounding then either we have to live long (which is impossible to assume) or compound our money at a
higher rate (practical to focus on).
Dempster Mill Manufacturing Company
Mr. Buffett had acquired 73% ownership of the Dempster Mill by August 1961 at an average price of $28.
Mr. Buffett had valued Dempster by providing an appropriate discount to various assets and he concluded the
value of those assets at $35 on the Fiscal year ending 30th November 1961.
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Mr. Buffett has provided a different discount on various assets. The discount applied on various assets is
mentioned in the 3rd column and discount adjusted in the value of assets is shown in the 4th column. Total value
of assets after discount was $4438000 and total liabilities of the company was $2318000. If he liquidates all the
assets after applying discount then he will receive $4438000. Now, if he repays all the outstanding liabilities from
adjusted value then the remaining balance with the company would be $2120000 ($4438 - $2318). Per share
value of Dempster was $35.25 ($2120/60146 (no. of outstanding shares)).
On 17th April 1962, Mr. Buffett met Mr. Harry Bottle and appointed him as the president on 23rd April 1962 for
the better utilization of capital and reduction of overheads. Mr. Harry had achieved all goals set by Mr. Buffett
and the result achieved is shown below in the form of balance sheet -
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They had to sell off the non-productive assets to reduce the liabilities of the company. Also, Mr. Buffett had
started investing the excess cash into the marketable securities in which he is an expert. Once again, he gave an
appropriate discount to various assets & after deducting the liabilities and adding fund (which he got through
shares) and resulted at the value of $3185000 (3471000 - 346000 + 60000). We can see that value of the company
had been increased from $2120000 in the year 1961 to $3185000 in the year 1962. Mr. Buffett’s and Mr. Harry’s
decision of capital allocation resulted in the enhancement of the value of the Dempster. And the value of the
company grew in the year 1963 as compared to in 1962.
Making a controlling stake becomes difficult for us as retail investors. So that we should try identifying companies
which are involved in the restructuring decision and also correcting their capital allocation decisions. There is an
Indian listed company which has gone through the process of restructuring in the year 2007-08. The company
has been experiencing a tough time due to some inappropriate capital allocation decision and hence the
management decided to correct their mistakes.
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Price of the company was Rs.4.28 in Sept’08 and the current price of the company is Rs.2144. We can see in the
financial highlights that the company has sold off nonproductive assets and paid off liabilities which enhances
the value of the company.
Mr. Buffett’s investment philosophy says –
In the above example of the Indian company, sales growth has contributed multifold returns, but even if their
sales did not show growth then their investors won’t lose their capital.
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4 – WARREN BUFFETT’S LETTER – 1964 – 1965

Posted on Feb 19, 2018
Mr. Buffett had made an investment into the “Texas National Petroleum” where announcement was made of
sell out of oil and gas producing business to Union Oil of California.
This kind of situation has a protected downside and we can generate a decent annualized return. Buffett had
made decent annualized return on this workout.
We can make decent return from such situations in India also. Here are some examples which are taken from
Prof. Sanjay Bakshi’s note. (http://ppfas.com/media/articles/sanjay-bakshi/special-situations.pdf)
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Mr. Buffett had sold off Dempster mill and he mentioned that “Our business is making excellent purchases --
not making extraordinary sales.” This shows that Buffett has emphasized on the buying decision and if we think
wisely then it’s only the buying decision that is in our control; so we should focus on buying business at proper
value hence reducing the additional efforts of selling.
Mr. Buffett demonstrated an outstanding performance in Down Jones and other few investment management
companies over a period of time.
Up to 1964, Mr. Buffett had categorized his investment operations into 3 categories (i.e. General, Workouts and
Controls) but from year 1965, Mr.Buffett expanded his categories of investment operations into 4 (i.e. General -
Private Owner Basis, Generals -Relatively Undervalued, Workouts and Controls).
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Workouts and Controls remain unchanged from the previous series.
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Posted on Feb 26, 2018
Mr. Buffett had acquired a controlling stake into Berkshire Hathway in the year 1965. Berkshire was a textile
company and Mr. Buffett had started acquireing stake of Berkshire since 1962 at the price of $7.60 per share.
During year 1965, Berkshire had closed down certain mills and only 2 mills were working as they were profitable
and with about 2300 employees. As per the calculations, net working capital alone was worth of $19 per share.
Diversification
Mr. Buffett gave his view on diversification and also gave his opinion on why aren’t all managers generating
superior returns.
Mr.Buffett says that he diversifies less as compared to what majority of the investment managers does. He can
willingly invest up to 40% of the net worth into a single company; where the probability is higher about his facts
and reasoning being appropriate in enhancing the value of investment.
Mr. Buffett mentions that we should have a proper diversifying policy rather than behaving illogically as others
do by owning one hundred securities into their portfolio. Rather, we should work as per our own view and
understanding.
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During the year 1966, Mr.Buffett had fully acquired Hochschild and Kohn & Co. The quantitative and qualitative
aspects of the business were evaluated and weighed against price, both on an absolute basis and relative to other
investment opportunities.

During the year 1967, Mr.Buffett had faced difficulty in identifying new investment ideas. And the reason he
felt was as below -
Mr. Buffett does not make an investment into the business which is difficult for him to understand (like
technology business). He prefers staying away from the stocks which are in fashion into the market as such
approaches doesn’t fit properly with his stock selection policy.
Mr. Buffett believes that big money can be made by making investment decisions based on qualitative factors
whereas sure money can be made by making investment decisions based on quantitative factors. And hence, on
the basis of this; he considers himself as a quantitative focused investor.
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Posted on March 8, 2018
Mr.Buffett has made a comment on the fund management business -
Mr.Buffett has mentioned that in the year 1967, Associated Cotton Shops, a subsidiary of DRC run by Ben Rosner,
and National Indemnity Company, a subsidiary of Berkshire Hathway run by Jack Ringwalt can able to earn about
20% on capital employed. And there are only 37 companies among Fortune 500 which can able to achieve such
performance. Achieving a better performance is not possible for each company. Also, Mr.Buffett indicates
irrelevant of focusing on market price.
Mr.Buffett has made a decision to liquidate partnership due to changing the market environment and increasing
the size of the fund manage by the Buffett. Such factors bring down the performance of the partnership and also
Mr.Buffett does not able to identify quantitatively cheap investment ideas. He suggested Bill Ruane as a fund
manager to the partners who want to give money to manage.
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Diversified Retailing Company owned two businesses - one was Hochschild, Kohn & Company of Baltimore and
another one was Associated Retail Stores. The company had sold out entire stake of Hochschild, Kohn & Company
of Baltimore to the Supermarkets General Corp. for $5,045,205 of cash plus non-interest bearing SGC notes for
$2 million due on date 2-1-70, and $4,540,000 due on date 2-1-71. The present value of these notes approximates
$6.0 million so, effectively, DRC received about $11 million on the sale. DRC has tangible net assets of about
$11.50 - $12.00 per share, an excellent operating business and substantial funds available for reinvestment in
other operating businesses. On an interim basis, such funds will be employed in marketable securities.
Buffett Partnership owns 691441 shares of Berkshire Hathway, the company having an operating businesses
includes Textile, Insurance, Illinois National Bank, Trust Company of Rockford Illinois, Sun Newspapers Inc, and
Gateway Underwriters.
Diversified Retailing Company and Berkshire Hathway, both were run by an excellent management and which
was one of the reason for Buffett to hold these both companies. Mr.Buffett mentioned that we should not focus
on the short-term price action of the securities because we are not holding a piece of paper but we are holding
a business. So if businesses will perform well over a period of time then the stock will also perform.
There were a few questions was asked to Buffett by his partners and Buffett has given logical answers to those
questions.
Above answer shows his genuineness, he is not ready to liquidate a business who has a huge employee strength
just because of his own benefits. He decided to keep business working till the time business does not require any
additional capital.
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Mr.Buffett stated his criteria for purchasing bonds.
Berkshire Hathway’s textile division experiencing a recession in the textile industry which has the impact of lower
profitability. Management has tried to control costs during a recession time so that operation can run more
efficiently. Other both major businesses i.e. insurance business and banking business of Berkshire performing
well.
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Posted on March 21, 2018
Mr. Buffett’s objective is growth of the business by improvising returns on total capital and returns on equity of
the business.
Textile Operation
Berkshire’s textile business was facing recession and that dropped the performance of the business. To sustain
profitability of the business; management is even trying to reduce costs as well as control inventories.
Insurance Operation
Berkshire started with reinsurance operation and home-state insurance operation, by acquiring home &
automobile insurance company.
Berkshire did not issue additional share capital to run the business. Instead he repurchased his own company’s
shares from the public during the recession.
Mr.Buffett believes that premium rate will drop in future due to increasing competition in Insurance business.
Merger of Diversified Retailing Company into Berkshire got approved pertaining to the terms and conditions of
issuing shares of Berkshire. Berkshire and Diversified Retailing Company both had shares of Blue Chip Stamps
and after merger of Diversified Retailing Company into Berkshire, the holding of shares of Blue Chip into Berkshire
increased.
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Textile operation
Berkshire in order to avoid the buffer inventory started its operations at 1/3rd of its installed capacity.
Insurance operation
Unusual profitability into insurance business increased the competition level into industry. On account of this
competition; the profit level of various companies decreased and the underwriting losses increased on a larger
scale. But above all of this, the insurance business kept on growing and earned higher returns on capital
employed.
Merger of Diversified Retailing Company into Berkshire was terminated by Board of Directors but Mr.Buffett
planned to reopen possibilities of merger in the future.
Textile operation
During 1975, the textile industry again faced recession and that resulted into the operation losses and reduction
of employment by ~53%. Most of the textile producers decreased their production and this resulted into business
rebound in the fourth quarter of 1975.
We can able to see that we should buy cyclical companies during the worst time of the industry as Mr.Buffett
has done.
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From the above, we can analyses that investors who had purchased shares of metal companies which dealt in
iron ore during December, 2015 where the prices were the lowest in the period of 10 years; have received decent
returns.
Insurance operation of the company showed underwriting losses which in turn reduced the fund available to
make an investment into the stocks and as a result of this; the investment portfolio reported an unrealized loss.
Mr.Buffett says that short term market price fluctuation is not important; only business performance counts and
hence he explains the criteria for the selection of stocks for holding the businesses for a longer period of time.
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Posted on April 20, 2018
Performance of the company has shown significant improvement in the year 1976 and company has been able
to achieve 17.30% returns on shareholders’ equity.
Textile operation
Return on sales and Return on capital employed of textile operations was inadequate due to sluggish industry
condition. Performance of any company can be measured by looking at the return on sales and return on capital
employed and whether the business has a temporary problem or not.
Insurance operation
In the year 1976, insurance underwriting business has shown good performance due to the increase in the
premium rates.
People measure higher earnings per share on the basis of the past record breaking earnings but according to
Mr.Buffett, if the company issued 10% additional equity capital and if due to that there is an increase in earnings
per share by 5%; then it is not considered a good performance. He mentioned that rather focusing on the higher
reported earnings per share, we should focus on the return on equity capital (I.e. RoE).
Textile operation
Textile operations once again were reported as poor earnings in the year 1977. Mr.Buffett gave a reason to the
shareholders for remaining into the textile business.
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Insurance operation
Mr.Buffett quoted the shifting of pendulum from good period to the worst period -
He mentioned his investment criteria as -
Diversified Retailing Company got merged into the Berkshire Hathway and due to this merger; holding of
Berkshire into the Blue Chip Stamps increased to ~58%.
Textile operation
When product is undifferentiated and business is capital intensive in nature, we earn inadequate return whereas
we can earn above average returns during a tight supply or shortage of product.
Investment into equities share carried out till 1979 at the lower of aggregate cost or market value. But from the
year 1979, accounting profession has decided to carry out investment at the market value.
Mr.Buffett has mentioned “Return on Capital Employed” as the criteria for measuring managerial performance.
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Few years ago, Mr.Buffett had decided to purchase a Waumbec Mills in Manchester, the stock was available
statistically cheap, well below the working capital of the business and, in effect, got very substantial amounts of
machinery and real estate for less than nothing. But this decision resulted into the poor performance and faced
too many difficulties to manage the business. Due to this experience, Mr.Buffett communicates an effective point
to understand -
According to Mr.Buffett, we should focus on the management who utilize retained earnings effectively and will
translate a dollar retained by them into a dollar or more of subsequent market value for us.
Mr.Buffett recognized his mistake in buying a bond and he had accepted this in front of his shareholders.
If we recognize our mistake and accept it, only then we can learn from it.
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Posted on April 26, 2018
Mr.Buffett gave his opinion about the repurchase of outstanding shares of the company.
He had discussed the effect of inflation to his shareholders in a very well manner.
Buffett focuses on businesses that can enhance the Return on Equity with the rising inflation and without the
need of additional capital requirement.
When there is a temporary trouble to the business; and if the managers have an ability to cure that temporary
problem, and the business itself can generate good cash; then
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Buffett mentions that we should focus on strong business so that it does not depend on the good management.
Mr.Buffett has given his view on maximizing economic benefits rather than accounting appearance. And also
stated some of the mistakes which the management is making.
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Rather than buying companies which have the management with above mentioned characteristics, he suggests
to buy a company which has the following characteristics.
Few companies are able to enhance their margins though their sales which are not growing with very high rate
and are still sustaining their market share.
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In India, there is an air cooler manufacturing company which grew well without major additional capital.
In the above table; we can see that Sales and Net profit has grown by 30% and 48% CAGR respectively. And if we
see cumulative capital expenditure made by company; then it is just 10% of the cumulative net profit. Company
has grown its sales and profitability without requirement of major additional capital.
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Mr.Buffett gives a good logical perspective that when the company can earn higher Return on equity; then they
should invest their earnings into the business itself. And if company is unable to earn higher Return on equity;
then they should distribute earnings to the owners so that the owners can deploy capital in a better way. But we
should be aware of companies that are raising capital for dividend payout.
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10 – WARREN BUFFETT’S LETTER – 1982

Posted on May 27, 2018
Mr.Buffett has mentioned characteristics of cyclical industries-
The product which can be differentiated and sell it by the branding of it then the company can able to earn extra
from it. But the product where no chance to differentiate product then profitability is a major factor of market
forces.
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We cannot predict that when the cycle will going to turn, we cannot predict that when demand will overtake
supply and prices of the commodity will start improving or supply increases much compared to demand and
prices starts falling.
We should focus on when any company is engaged in a corporate acquisition. If any company is issuing shares
for the acquiring a company which having lesser intrinsic value then we should keep cautious. Such decision of
the management provides us with a clue regarding the perspective of the management and weather company is
intended to create a wealth of the owners or not.
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While management makes an acquisition at the expensive valuation by issuing their shares than some of the
rationale given by management which we should check by putting highest cautions.
Mr.Buffett had provided a solution by which management can avoid value destruction for the existing owners of
the company.
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Many a time, management only focuses on the increasing future earnings Per Share (EPS) by sacrificing the
strength of the balance sheet. But they forget that if the balance sheet does not remain strong for a longer period
of time then business is going to have a tough time into the future.
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The criterion which Mr.Buffett focuses while making an investment decision -
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Posted on June 3, 2018
Berkshire Hathway made an acquisition of majority stake into Nebraska Furniture Mart. Mrs.Blumkin leave Russia
for America when she was the age of 23. She had no formal education, no knowledge of English.
Many retailers had pressurized to the furniture and carpet manufacturers to not to sell products to Mrs.B but
Mrs.B has managed to run her business and also able to cut prices. She has to face many cases but she won all
and received huge publicity.
Mr.Buffett has explained the concept of intrinsic value in a very well manner.
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Mr.Buffett has explained how to look at the economic Goodwill with the example of the See’s Candy. The
emphasis more on economic Goodwill rather than accounting Goodwill. Company's ability to produce a higher
return on assets compared to market then that excess return is economic Goodwill.
Also mentioned that assets heavy businesses require additional capital for further growth.
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I have to try to explain concepts with the few examples – 2 companies are into the construction and development
of infrastructure and one company is into the branded real estate business.
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Great business creates a fortune during an inflationary year where the company requires less tangible assets.
And also companies having availability of the fund for acquisition of the new business. They do not have to
depend on the bringing additional fund by either debt or issuing new share capital.
I have quoted the example of 2 two companies into the automobile business and one company is in the paint
business.
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Example 1 – 3 which are asset-heavy businesses, where we can see that borrowing is compounding, non-
availability of free cash flow and wealth of shareholders does not created or get erode, whereas in example 4 –
6 which are asset-light or least asset businesses, we can see that borrowing reduced or increased at a lower rate
and investments into the books has compound well, availability of free cash flow which resulted into the wealth
creation for the shareholders.
But the management who is not disciplined then they will do silly things such as -
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Mr.Buffett has mentioned the benefits of the repurchase of shares.
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Posted on June 24, 2018
Mr.Buffett indicate that Berkshire Hathway has a capability to earn superior return generally earn by corporate
America.
We need to focus on the mistakes which we have made and try to learn from our mistakes.
Berkshire liquidates its textile business in the year 1985. Cyclical nature of the business and huge competition
makes them helpless which resulted in the shutdown of the textile business.
If management having good managerial skills then company able to produce a good economic return.
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Commodity business only able to produce profit while prices of the product are fixed or capacity is shorted. And
managers can enhance capacity with the availability of capital when things look good in the future.
Acquisition of Scott & Fetzer
CEO of the Scott & Fetzer - Ralph Schey is capable enough. When he took charge of the company, at that Time,
Company had 31 businesses. Ralph had disposed of many of the businesses which have limited profitability and
result of that company left with 17 businesses. Capital allocation decision of the Ralph is good enough which
Mr.Buffett admired.
After the purchase by Berkshire, Schey spent two years for revising World Book segment by selling off the
Japanese division and trimming domestic operations in much the same way as he had tightened Scott Fetzer.
Mr.Buffett mentioned that he and Mr. Charlie only having a major two job to perform - one is to retain and attract
a good manager to manage a business and other is to allocate capital of Berkshire Hathaway in a way which helps
to earn more money than average.
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Acquisition of the Fechheimer Bros. Co.
Mr.Buffett mentioned that he only acquire a company when economic characteristics of the business are
favorable and connected with the right people who can handle position with integrity.
Mr.Buffett on Accounting numbers -
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Posted on July 22, 2018
Mr.Buffett indicates the behavior of most of the investors and which should be avoided.
Companies which can perform well and earned 20% above return on equity, all those companies have also
performed well into stock-market in terms of stock prices. But such companies are few and we need to identify
those and sit tight with holding those companies. Companies which have a good earning power then those
companies do not require of the debt.
Mr.Buffett indicated that they do not cut down budget as the profit of the company falls. He has always focused
on the employees and their welfare. We have seen that the Textile division of the company remains to continue
for the longer period only due to largest employees’ works at the company.
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Whenever shortage of particular commodity arises then prices of particular commodity start rising and
commodity companies start getting benefits of price raised.
We should enter into the commodity companies when there is an excess supply and price of the particular
commodity is traded lower which having a lower profitability, lower return ratio, such lower prices bring
bankruptcy to weak companies etc. and should try to exit when shortage of supply and price of the particular
commodity is traded on a higher side. But generally, we forget it and enter while the financial matrix of the
commodity companies already improved which creates wealth destruction.
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Major mistakes done by an investor in the cyclical company is that they choose to invest when commodity prices
are at higher level, return ratio improves well, profitability margin improves, etc. We should try to avoid such a
mistake.
Additionally, Mr.Buffett explained the philosophy of Ben Graham to see a market. Ben Graham quote market as
Mr. Market and price moment as the mood of Mr. Market.
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Mr.Buffett has made a point regarding when he will ready to sell his existing security in which he has made an
investment. These points can be used as a checklist for selling decision of our investment.
People have misunderstood saying of Mr.Buffett and they keep on believing that Mr.Buffett never sell his
investment and keep on holding it forever. But in reality, it is fact. He is also ready to sell securities when above-
mentioned criterion matched with his investment and he holds till above-mentioned criterion does not match.
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14 – WARREN BUFFETT’S LETTER – 1988-89

Posted on August 25, 2018
Borsheim’s
Berkshire Hathway has made an investment into the Borsheim’s which is a jewelry business in Omaha. This
business is run by family members of Mrs.Blumkins (Founder of The Nebraska Furniture Mart). This business also
getting managed by the people who have similar quality as Mrs.B such as an extraordinary combination of brains,
integrity, and enthusiasm for work. All members of the Friedman family has been continuing with the managing
business as they were managing before Berkshire has acquired an interest.
Insurance business of the company remains in the pressure since long time and company expect to the
float/premiums ratio to be at least three times in the year 1989 and 1990 with help of the team of Mike Goldberg,
Ajit Jain, Dinos Iordanou, and the National Indemnity managerial team.
In the year 1988, Berkshire has made an acquisition of Coca-Cola and Federal Home Loan Mortgage Pfd. (“Freddie
Mac”).
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Mr.Buffett had made an investment into one arbitrage situation - Rockwood & Co. when he worked at Graham-
Newman Corp. Rockwood & Co. is a chocolate manufacturing company based in Brooklyn. During the year 1954,
the price of the cocoa soared due to the temporary shortage.
Mr.Buffett give few points to keep in mind while making an investment into an arbitrage opportunity-
Efficient Market Theory which is more in trend and many people believe that the market knows everything. Yes,
Market know anything which we also don't know, but it is also the fact that many a time, the market also provides
us an opportunities to make an investment which reward us in future.
Mr.Buffett also mentioned that if the market is efficient and know everything then he has not generated decent
returns by investing into the various arbitrage opportunities. We also have seen wealth creation through
investing into the equities and if the market knows everything then few people are not able to generate good
wealth. But with such arguments, we should not forget that market also knows many things and already
discounted those into the price of securities.
Borsheim's - Jewelry business focusing more on the controlling cost and this cost control attracts more sales
volume.
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Berkshire has tripled advertising expenditure for the See's Candies which reach the highest percentage of sales
and which has converted into good sales.
Coca-Cola has started a new journey into the year 1981 with the appointment of the Roberto Goizueta as a CEO
and Don Keough. Due to both, a product of the company started gaining momentum and sales has been started
improving. They transform business in a manner which can benefit to the shareholders.
Berkshire Hathway purchased preferred of the Gillette Co. -
As Mr.Buffett mentioned, we also need to look for the cover over depreciation as we look for the cover over the
interest expenditures. Depreciation & capital expenditure is also a real expense, we can delay it but we cannot
avoid it. If the company continuously keeps on avoiding capital expenditure then business will no longer remain
into existence.
Low depreciation cover companies
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We can see in above image that companies having a low depreciation cover then those companies need to bring
external finance (Debt or dilution of capital) for expansion whereas those companies having a good depreciation
cover then those companies do not need to bring external finance to fund expansion (repayment of debt or
buyback of shares also can be done).
High depreciation cover companies
Mr.Buffett has mentioned his past mistakes for the review purpose. He believes that before committing new
mistakes, we need to review our old mistakes.
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We can learn and correct our mistakes from the learning from the mistakes of Mr.Buffett. These mistakes show
us a transformation of Mr.Buffett from buying a "cigar butt" to a business which has an economic value.
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15 – WARREN BUFFETT’S LETTER – 1990-91

Posted on September 2, 2018
Mr. Buffett mentioned that we need to thoroughly analyze earnings and accounting numbers; we should not
focus on the big auditor names.
Low prices and low cost of operations for their Jewelry and furniture business creates huge volume growth. Such
a low cost of operation is difficult to adopt by competitors.
While we are analyses an insurance company then we check combined ratio for the measuring profitability of
the insurance company but with it, we need to check -
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Mr. Buffett mentioned that majority of the company’s follows what their peers are doing though they seem
foolish.
Example of PSUs & Private Bank
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We should not focus on buying only cheap companies without knowing the quality of assets on which they seem
cheap. We can see that PSUs banks have majorly traded at discount compare too few private banks which have
a quality of books. PSUs banks seem cheap on the basis of Price to Book Value but the quality of books is
questionable, which we have already experienced.
Mr. Buffett has mentioned few quality of management which we also can check when we make any investment.
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As an investor, we need to always focus on the Margin of Safety which is mentioned by the Ben Graham. The
margin of Safety provides us a safeguard against any errors occurs by us.
In long run, our investment returns will occur through the stock prices but stock prices are derivatives of the
future earnings of the business. If the business is not performing well, earnings not grown in future then stock
prices also not given us return in long run. So that we need to keep the focus on the business performance, an
earnings growth driver of business rather keep the focus on the stock price performance.
When we talk about the strong franchise of business then we should focus on the criterion into the business
which mentioned by Mr. Buffett. All businesses do not fall under such criterion but those businesses fall under
such criterion those can earn a higher return on capital for the longer period of time through price its
product/services aggressively. If business having a strong franchise then we do not require strong management
to run the business.
Liquor is a desired of people and customers does not have any close substitute (legal) of it but in India, the price
of liquor is regulated so that we cannot say that liquor business has a strong economic franchise. Watching
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movies at the multiplex is a desired of people, no close substitute is available for it and also the price of the ticket
is not regulated.
Whereas those businesses which do not have a strong franchise then those businesses can only earn decent by
low-cost production of products/services or shortage of products/services. And shortage does not stay for longer
period of time. Shortage of particular product with huge industry size invite more players into the industry which
reduces the profitability. For continuously remaining low-cost producer, business needs to be run by the strong
management or else business will not sustain as a low-cost producer for a long period of time.
We generally provide difference valuations to the businesses where we can foresee constant earning with the
lower capital requirement and where we cannot foresee earning with cyclical business nature. Mr. Buffett has
explained this concept by mentioning Media business and steel business. He mentioned that we believe that
media business having a constant revenue and steel business having a cyclical business nature but when media
business has started to getting deteriorate then we revise our way to value media business.
See's, Candy
Berkshire Hathway had bought See's Candy through Bluechip stamp in the year 1972. The company owned $7
million of tangible net worth with $10 million of excess cash. The seller had asked $30 million (cash adjusted) for
the 100% ownership of See's candy. Buffett and Charlie were ready to pay only $25 million for Sees. Buffett and
Charlie have been experiencing a pricing power to the business and they felt lucky that seller agreed to sell
See's at $25 million to Berkshire. See’s sales grown from $29 million to $196 million and pre-tax profit has grown
from $4.2 million in the year 1972 to $42.4 million in the year 1990.
H. H. Brown
Berkshire has made an investment into the H.H.Brown Company, which is a shoe manufacturing business.
H.H.Brown is a leading manufacturer of work shoes and boots in North America. Mr. Buffett knows that shoe
business is tough to perform due to higher inventories and receivables but he has experienced that H.H.Brown
has done well in the leadership of Frank and Mr. Heffernan.
If we got a good business which is run by a good manager among the bad industry then we should check such
business as an investment candidate.
Berkshire Hathway earns from holding policyholders fund which Mr. Buffett called as “Float”.
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Berkshire Hathway has beat government bond in 20 years from 25 years till the year 1991 and cost of the fund
remains satisfactory which help Berkshire Hathway to grow well. Insurance business of the company sustain well,
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increases float. Lower cost of float and Berkshire has compound it in a good manner which is a major strength of
the company for being an out-performer.
Mr. Buffett has mentioned that they don't like to trade business to business. He considers that He & Charlie are
not as smarter to earn well by buying and selling businesses for a longer period of time. He likes to buy businesses
which have long term economic characteristics, run by quality people and available at a sensible price.
Mistake Du Jour
In this section, Mr. Buffett has written on mistakes which he has incurred. He believes that people cannot able
to see mistakes incurred by Berkshire, that does not reduce the cost associated with mistakes. Berkshire has
missed few opportunities such as esoteric invention (such as Xerox), high-technology (Apple), or even brilliant
merchandising (Wal-Mart) but they do not consider it as their mistake. Such type of the businesses does not fall
under their competence area to understand so they have missed it. Few mistakes which they have occurred from
their competence area.
In the year 1988, they decided to purchase 30 million shares of Federal National Mortgage Association (Fannie
Mae). They owned stocks since earlier years and also understand the business. But when they have bought 7
million shares and the stock price has started moving upside and they have stopped buying it. They do not repeat
mistakes which they occurred while buying shares of Coca-Cola, they have to keep on buying shares of Coca-Cola
though the price has moving upward. But here, they sold 7 million shares which they hold due to the small
position. Such a mistake has cost to Berkshire is about $1.40 billion.
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Mr. Buffett has written that they own a collection of business which is exceptional and also a run by an
exceptional manager which has resulted in the higher returns.
Nowadays I have experience that everyone is becoming a market expert and providing their view on the short
term direction of the market. For such people, Mr. Buffett has given a good quote -
The Salomon Interlude
In 1991, Saloman Brothers caught for bond trading scandal and Mr. Buffett has performed as a chairman of
Saloman for the ten months to resolve the problem at Saloman. At Saloman, they have been submitting false
bids in an attempt to purchase more Treasury bonds than permitted by one buyer during the period between
December 1990 and May 1991.
Five authorities - the SEC, the Federal Reserve Bank of New York, the U.S. Treasury, the U.S. Attorney for the
Southern District of New York, and the Antitrust Division of the Department of Justice - had important concerns
about Salomon.
Acquisitions
Many acquisition-hungry managers made an acquisition with the hope that they will transform business which
will provide them with a good opportunity to earn. When a manager get failed, they learn a lesson but
shareholders pay fees for selecting them as an investment candidate. Mr. Buffett has accepted that during his
earlier career, he also has made acquisitions but be able to achieve success due to cheapness into acquisitions
and some of the acquisition got failed also. And due to such mistakes to get a failure, he revised his strategy to
make an investment.
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Berkshire has made an investment into the Central States Indemnity which is an insurance company provides
insurance to the credit-card holders who are unable themselves to pay because they have become disabled or
unemployed.
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H.H.Brown, a Subsidiary of Berkshire has made an acquisition of Lowell Shoe Company which is into the
manufacturing of the shoes for nurses, and other kinds of shoes as well.
Mr. Buffett has initial thought of purchase General Dynamics for the tendering stocks to the buyback and earns
a small profit in short term. But Mr. Buffett began to study the company and he found that Bill Anders, CEO of
the company has performed a decent job to run a business. Mr. Buffett has dropped the idea of buyback
opportunity and decided to become a long term investor of the company.
Investing strategy of Berkshire has been little change and also Mr. Buffett has made some compromise on the
price to purchase a business’s due to market condition and their increased size.
Now, how to know an attractive price? Mr. Buffett has explained that we look attractive price with the framework
of value or a growth investor - what we consider to ourselves. He explained that growth is always a component
during the calculation of the value of any company. He mentioned that people using value investing term
everywhere with the paying higher price than calculated the value in the hope that someone pays higher to
purchase an asset from them. But such activities do not consider as an investment, it is a speculation.
People consider value investing where attribute such as low Price - to - Earnings ratio, low Price to Book Value
ratio or high dividend yield or combination from mentioned and not consider value investing where reverse
attributes are available. Many times, business growth also tell us little about the value but it is also true that
often growth has a positive impact on the value. We have to analyze whether a business can able to generate a
good return on the incremental invested capital or business generating a low return on incremental capital.
Former one provides the benefit of growth to the investors and the latter one hurts to the investment.
Ex - Value Trap
Taken from Thoughts on Thoughts blog
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The company looks very cheap on the basis of the financial metrics, but if someone who does not have paid
attention to the business of the company then---
An investor has lost his capital also. So, that in value investing also, we cannot escape from the future. (For detail
article, Kindly visit - http://neerajmarathe.blogspot.in/2010/04/mtnl-value-trap.html)
Value Trap - One of the educational providing company which fall under the criteria of value investing -
The company is not able to generate good growth in sales and in the profitability but investment and cash have
grown well. Also currently the company is available below cash + investment which fall under the criteria of the
value investing. But what about the growth into the business or on the survival of the business. Will be cash &
investment remain with the company in future? Lower sales, higher expenses, lower profitability and since the
last 3 years the company has stopped paying a dividend. Should we consider such investment as value investing
or value trap?
Ex - Growth at a low return on capital companies
The company which are generating a good sales growth but they is not able to generate a higher return on capital
they employed then those companies require to take debt or dilute equity (in-short they need external funding).
Investors of such companies will face difficult to create wealth or sustain wealth.
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We can see that companies having higher sales growth but cannot able to generate a higher return on capital
then they require to bring external finance to fund the growth. The growth of such companies will extend for the
long period but investors face difficult to create wealth.
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Ex - Growth at a higher return on capital companies

Reverse to above if company having a good growth with having a higher return on employed capital then
company does not require to bring external financing (if they having a borrowing or a dilution of capital then the
size of it is very small in proportion) to fund the growth of a company and also investors of such a company can
create a good wealth.
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Ex - Higher growth but no value
If we just focus on the growth of the company and not on the quality of the growth then we need to lose our
capital also.
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The company having good growth but does it have a quality of growth?
More dangerous balance-sheet quality after FY2010 -
Every time does not value investing or growth investing provides a better investment opportunity but a rational
combination of the both can be good investment opportunities.
Mr. Buffett has explained valuation matrix given by Mr. John Burr Williams which is determined by the cash
inflows and outflows - discounted at an appropriate interest rate - that can be expected to occur during the
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remaining life of the asset. He has given matrix which similarly uses for bond and stocks. But bond involves fixed
future cash inflow in-terms of coupon received by us and inequities such coupon is not fixed, we cannot say with
surety about future cash inflow and outflow for business. Cash inflow and outflow into equities are highly
dependent on the nature of the business, quality of management. For overcoming such problem Mr. Buffett uses
two rules at Berkshire -
According to Mr. Buffett, new issue market is controlling by the stockholders and institution; also new issues
come during favorable market conditions and we need to pay a higher multiple. Here, we are not going to get
any bargain whereas in the secondary market, many times, we get x value business at the 1/2x.
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Dexter Shoe
H.H.Brown shoes (Purchased by Berkshire) has made an acquisition of Dexter Shoe in the year 1993, which is in
the business of manufacturing of popular-priced men's and women's shoes. Buffett & Charlie admire Dexter as a
business. Dexter's has a 77 retail outlets and company is a leading manufacturer of golf shoes which is producing
15% of U.S. output.
Example - Good player into the worst industry matrix
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We can see in the above example of three real estate companies where Company - 1 having a good matrix
compared to the other two companies. Also equity dilution into the company - 1 is increased by 1% CAGR in last
10 years compared to 12% CAGR and 5% CAGR in last 10 years respectively for the company - 2 and company -
3. We can see that debt and equity both has increased into the second and third company whereas company - 1
has maintained balance sheet strength. During a good period, the company - 1 has the least inventories as a %
of sales and other 2 companies has higher inventory as a % of sales. Sales of a company - 1 has increased by 10%
CAGR in last 10 years compared to -7% CAGR and -6% CAGR in last 10 years respectively for the company - 2 and
company - 3. We can see stock performance then company - 1 has given 53% CAGR in last 17 years compared to
-9% CAGR and 15% CAGR in last 11 & 17 years respectively for the company - 2 and company - 3.
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We need to focus on the good player into the worst industry matrix for making an investment. Generally, a good
player will gain the market share compared with the worst players into the industry and able to survive for a
longer period of time. Also our invested capital get protection with the creation of wealth. The similar pattern
we can able to find at infra, telecom, power sectors, etc.
Many of us misunderstood that insurance business of Berkshire get float as a free of cost but it is not true. When
insurance business incurring underwriting losses then such losses need to take for consideration as a cost of float.
Mr. Buffett and Mr. Munger believe that they are not smart enough to make many right decisions. But they like
to hold good business forever and avoid to make many decisions. We should consider "Risk" as a loss, not the
academic definition of "Beta" as the volatility of the portfolio.
We should focus on what the company produces, what competitors are doing, how much borrowing company
has taken rather than focusing on the price history of the company and daily price movement of the stocks.
Criteria for focusing on investment evaluation -
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Mr. Buffett has explained three scenarios of management and owners of the company which impacts to the
performance and corporate governance of the company.
First scenario where no controlling authority and company managed by directors
The second scenario where controlling owner also work as a manager
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A third scenario where controlling owner who is not involved in the management
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Posted on October 7, 2018
Mr. Buffett has mentioned that they are ready to wait for opportunities within their comfort zone. They do not
like to capture each and every opportunity but want to capture an opportunity within their circle of competence.
He added that they have picked up their best investment when some of the macro factors are at the peak. Here,
we can also make an interpretation that we also can make a good investment when macro are at the peak of
worst situations such as 2008 global crisis, 2013 depressed economic growth with policy paralysis, etc.
Own investment approach
Book Value and Intrinsic Value
Mr. Buffett has explained how we need to look at the growing business in-terms of earning and not huge growth
into the book value.
Berkshire has made an investment into the Scott Fetzer at the beginning of the year 1986 with having a collection
of 22 business which is same in the year 1994. They paid $315.20 million for Scott Fetzer which having a book
value of $172.60 million.
Performance of the book value given by Mr. Buffett of Scott Fetzer -
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We can see that book of the company has not grown but earnings of the company have grown approximate
double. Also when Berkshire has made an investment into the company then the company has debt on balance
sheet and in the year 1994, the company becomes virtually debt free. Return on equity has been improved well.
Intrinsic Value and Capital Allocation
Whenever merger and acquisition made by management then they should have a focus that whether the intrinsic
value of the company is increasing or getting diluted.
We need not make a difficult investment for getting a good return if we can able to analyze business which is
easy to understand and its economic characteristic are long lasting then we can get a good payoff for our
investment.
They also give priority to the existing investment rather buy a new investment. They compare that which
investment opportunity is more beneficial to them.
Mistake Du Jour
Mr. Buffett has mentioned that purchasing a USAir in the year 1994 as his mistake.
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Acquisitions
Mr. Buffett has explained regarding acquisitions that when the company has a business which is performed
sometimes and worsen at few times then we need to sell the business when it is performing well. Majority of the
company doing same so that when the acquisition of any company happens then majority of the time acquiring
company does not get benefits. We need to carefully analyze whether acquisition increases a per share intrinsic
value for shareholder or not.
Examples of wealth destructor companies through acquisition
One of the medical device company which has done reverse compounding of the wealth of investors –
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One of the wind energy company which has done reverse compounding of the wealth of investors –
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Helzberg's Diamond Shops
Helzberg's Diamond Shops was started by the grandfather of Barnett Helzberg, Jr. In the year 1915 with a single
store which has increased to 134 stores in 23 states. Sales had grown from $10 million in the year 1974 to $282
million in the year 1994. Berkshire has taken stake into the company in the year 1995.
R.C. Willey Home Furnishings
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R.C.Willey is the leading home furnishings business in Utah. Bill Child, CEO of R.C. Willey has taken over the
business from his father-in-law in the year 1954 when sales were about $250,000 and he put efforts which
resulted into the sales of $257 million in the year 1995. Company accounts for 50% of the furniture business in
Utah.
According to Mr. Buffett, Retailing is a tough business -
GEICO Corporation
Mr. Buffett has bought GEICO into his personal account when he was at the age of 20 years.
Float
Berkshire has not only compounded business earnings but also compounded its float. Since the year 1967 to the
year 1995, Company has compounded its float by a compounded rate of 20.7%.
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Examples of the companies which generating 10%+ ROA and compounded float -
One of the automobile and commercial vehicle company which has created a huge wealth –
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One of the automobile company which has created a wealth –
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One of the FMCG Company which has created a huge wealth –
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One of the Asset Management Company –
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Charlie and Buffett believes to control being wrong and follow - "Just tell me the bad news; the good news will
take care of itself"
Disney
The merger of Cap Cities into the Disney approved in the year 1995 where Cap Cities shareholders get a choice
of cash or share of Disney (one share of Disney for one share of Cap Cities). Berkshire has selected share option
for their 20 million of Cap Cities shares.
Mr. Buffett has been interested into the Disney since the year 1966 where Disney was available at ~23% of pre-
tax earnings yield (23% = $21 million of pre-tax profit / $90 million of market value).
Berkshire always respects shareholders though they hold large size or small size.
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Acquisitions
Kansas Bankers Surety (KBS)
The company is an operating into the business of insurance which has a presence in 22 states, decent
underwriting record with Don Towle as a manager. They made a deal to acquire a company at $75 million.
FlightSafety International
The company is the world's leader in the training of pilots. The company operates in 41 locations, outfitted with
175 simulators of planes ranging from the very small, such as Cessna 210s, to Boeing 747s. About half of the
company's revenues are derived from the training of corporate pilots, with most of the balance coming from
airlines and the military. They made an acquisition at $1.5 billion.
We need to prepare a list of the errors which can be dangerous for the health of our investment and work to avoid
those errors. If we work on the avoiding mistakes then we can win 50% of the battle.
List of mistakes which I have experienced during my investment journey –
 Never ignore the true value of the company---Every business has some value and that we should not
have to ignore. If we commit such a mistake then the market will defiantly punish us. Be careful with the
true worth of the company and only buy it when it falls below its true worth. And if business not available
below its true worth then ready to missed that opportunity. Loss of opportunity is better than the loss of
capital.
 Don't buy HOT ----If we buy the hot business such as recent trend, new IPOs, business on which everyone
is bullish etc., then we must have to exit it at the proper time. So if we aren't able to exit at the proper time
then it's better to let it go such opportunities. If we buy HOT then that HOT will BURN our portfolio.
 Buying a high leverage business --- We need to avoid a business which has a huge borrowings, such
borrowings can kill the business and also kill our investment journey.
 Using the wrong valuation method --- Every business will not get valued with a similar valuation matrix.
We need to identify the nature of the business and then value a particular business. Such as we should not
use the valuation matrix of growing non-cyclical business for cyclical business, should not use the
valuation matrix of assets light business for assets heavy business and vice-versa. If we made such a
mistake then whether we might miss a decent investment opportunity or we might lose our capital.
 A mistake of buying a story, not a fundamental --- I have never ever made such a mistake because I am
a hard-core lover of numbers. But I have seen many of the people who always focus on the story and also
which is very trending to the market. I believe that without the support of numbers, no story can survive
for long. In the year 2014-15, Logistics stocks due to GST gets a trending story but due to lack of good
numbers, the story gets failed. People generally avoid numbers due to lack of understanding of it. I firmly
believe that “Stories are for kids, not for investors.”
 Investing without a process and philosophy --- I can overcome this mistake at the initial period of my
investment journey and that is only because of my guru – Neeraj Marathe Sir (who always believe on
having a process and philosophy for making an investment). I have seen many people who spent lots of
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time into the market but they do not have any process or philosophy. They change their philosophy as they
meet various people. If we do not have our own process and philosophy for making an investment then
we will not able to create a successful investment journey. I also learn from my guru that we must have
our philosophy in a written format so that we can refer it over a period of time and stop ourselves from
occurring a mistake.
 Not using a checklist --- We should have a checklist for a business, industry, financial, management etc.
so that we can focus on the points to study and also not forget any point to study. I am using a checklist
for the last 3 years and I can say that having a checklist helps me a lot. My checklist keeps on improving
as my experience grows.
 Making an investment decision with disturb mind --- We should avoid making an investment decision
while our mind is disturbed. Disturbance in mind will end up with the faulty investment decision and
which can be harmful to our wealth.
 Cloning a well-known investors/fund managers --- Again I can overcome this mistake at the initial
period of my investment journey and again credit goes to my guru. If we have our process and philosophy
then we will not try to clone others. I have seen many people who have spent 10-15-20 years to the stock
market then also not having any process and philosophy & they clone others. Many of the people have
cloning as their investment philosophy because they love to use shortcuts. I always remember the quote
of my guru –
When Company does not have an opportunity to reinvest earnings at a higher rate than the company should
distribute those earnings to the shareholders so that they can use it somewhere for getting a higher return. If
the company does not have a good opportunity to reinvest earnings and then also company does not distribute
earnings as a dividend then we need to be careful with a company (Question on the capital allocation decision of
a management or earnings can be manipulated or business always needs a huge capital to sustain only).
Examples - No/Low growth high dividend payout
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Examples - No/Low growth low dividend payout
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We need to check the above-mentioned factors in the company where we have made an investment and where
we want to make an investment. Most important is to gain a market share. The company cannot able to gain
market share, though the company has a competitive advantage then that competitive advantage not useful for
us. We should not focus on the leadership position of the company rather need to focus on the companies which
focus on the manufacturing, distribution, packaging and product innovation. Market leadership can be changed
if the company does not focus on the mentioned points.
According to Mr.Buffett, paying a higher price does not risk for the good companies compared to paying higher
prices for the bad companies.
Let me take an example of one the biggest wealth creator company of the Indian stock market---
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If someone has bought this company during the March-2000, at the high price of around Rs.431 then after the
16 years of the period, he gets returned at 7% CAGR. And if enter to the similar company at the low price of
around Rs.275 during the March-2000 then after the 16 years of the period, he gets a returned of 10% CAGR
(*Considering all-time high price for calculating returns). Though revenue has grown at 30% CAGR, Operating
profit grown at 27% CAGR and Net profit also grown at 27% CAGR during the same period with supported by a
good management team. During March-2000, the company was traded at 64x P/E at the low price of Rs.275 and
this multiple is common nowadays.
When management of a good business diverts their focus into the business which is not performing well then
such decision of the management affect the performance of the business.
Example – We have seen examples such as liquor manufacturer enter into the airlines business, airport
contraction business has diversified into the power business.
Mr.Buffett has also mentioned the Circle of Competence concept -
Control on our temptation, control on our emotion towards our investment is essential to survive and create
wealth from our investment.
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We need to wait for the opportunity which falls under our Circle of Competence and we are comfortable with it,
rather catch each opportunity.
We do not have to try to capture each and every single opportunity available rather we should focus on the
opportunity which falls under our Circle of Competence and our philosophy. Till the time, we need to wait for
the appropriate opportunity. Those who try to capture every opportunity, they do not get a better investment
result.
As we have discussed investment into the cyclical industries in one of the articles of the same series (WARREN
BUFFETT’S LETTER – 1987), we further get insights from Mr. Buffett -
When higher the supply of a particular commodity then prices of that particular commodity starts falling and
vice-versa with the lower supply of the commodity. We should build a position into commodity companies during
an excess supply of a particular commodity and we get insights for dry out excess supply.
Repurchase of Shares
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We have seen in the current market fall that many people lose their investment, many have made an investment
by bringing borrowing. But those who are careful and defensive investors, those get an opportunity to acquire
position into the businesses at an attractive valuation. Many of the investors, I know who was holding a good
liquidity position in their portfolio. They got saved from market fall. I also have experienced similar because of
having good liquidity positions into my portfolio.
Acquisitions
Berkshire has made an acquisition into Star Furniture and International Dairy Queen (Company has a 5792 dairy
stores in 23 countries)

When the company spends any money than Mr. Buffett always analyze that whether company able to create
more than one dollar for anyone dollar spend or not. If the company can able to create more than one dollar for
every dollar spend then they are happy to spend money. If the company is incurring a capital expenditure and
consistently company is not able to earn higher returns than the company is facing capital allocation problem.
We do not have to check it for 1, 2 or 3 years but we need to check it for a longer horizon.
Indian Company examples –
One of the textile machinery manufacturing company -
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One of the tyres manufacturing company –
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One of the largest IT Company –
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Berkshire help to the CEOs of companies in which they have made an investment -
They also focus on the long-term benefits from the business rather focus on the shorter term perspective.
Additionally, Mr. Buffett and Mr. Charlie provide an environment to the CEOs where CEOs can show their talent.
When CEOs does not have such kind of pressure and time freedom then they can able to perform well with the
value creation among the business. Unnecessary and excess of meetings also reduces the performance. Also,
those who do not have a pressure, get the freedom to work then they will produce a better result.
General Re
Berkshire has made a 100% ownership acquisition of General Re which is operated into the reinsurance business.
The company is the largest U.S. property-casualty reinsurer, the company also owns 82% of the oldest
reinsurance company in the world, Cologne Re. The two companies together reinsure all lines of insurance and
operate in 124 countries.
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Posted on November 4, 2018
Accepting mistakes - Mr. Buffett has accepted mistake of poor equity performance during the year 1999.
Though they have a wonderful track record, they do not get trapped with the overconfidence, does not show
any excuses, stay down to earth and stick with the reality.
Example of Management Quality
Example of Indian Companies
One of the footwear company in India
One of the diagnostic chain company of India
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Mr. Buffett has given his view on Tech Companies -
We should have to define and written own investment philosophy and need to follow it strictly. If some of the
investment opportunity does not fall under our investment philosophy then we should avoid it, though
everyone else wants to capture a particular investment opportunity.
Business with a valuation -
Mr. Buffet has mentioned that line between speculation and investment is not clear and blur so we have to
identify the investment process according to our course of action. The definition given by Mr. Benjamin
Graham can be useful to us for identifying investment process - “An investment operation is one which, upon
thorough analysis, promises safety of principal and an adequate return. Operation not meeting these
requirements are speculative.”
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Example of the Indian companies which have a higher related party transaction
One of the Cable manufacturing company
One of the spirit company of India
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We have seen into the current scenario that when people have started believing that investing/speculating to
the equities provides them a higher return (no one remembers what Ben Graham said for return - should
expect reasonable return) then only bubble started to build up.
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We need to analyze financial statements and notes to accounts with huge care so that we can identify flaws
which management wants to hide.
Indian companies Examples – Companies having growing sales but the majority of sales from related parties.
The company engaged in manufactures pumps, motors, valves, and custom-built power systems/manifold
blocks.
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The company is a travel management company.
Acquisitions
Berkshire has made a five investments in the year 2002 which are Albecca (U.S. leader in custom-made picture
Frames), Fruit of the Loom (the producer of about 33.3% of the men's and boy's underwear sold in the U.S. and
of other apparel as well), CTB (a worldwide leader in equipment for the poultry, hog, egg production and grain
industries), Garan (a manufacturer of children's apparel, whose largest and best-known line is Garanimals) and
The Pampered Chef - Founder Doris Christopher (in a business of manufacturing kitchen tools, food products,
and cookbooks for preparing food in the home).
John Holland who is managing Fruit has Rescue Company from the disastrous path. We can see that if the
management of the company is capable enough then he can run the business in a good manner rather than spoil
it.
Two company from the same segment one has survived under the worst period and other has made a disaster.
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The company has a sales growth, growth in cash balance, free cash flow for the cumulative period, a major
portion of the assets side of the balance sheet is Net Block as a company is into the capital-intensive industry but
investors of the company do not lose money.
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Another company from the same segment where Company has does not have a sales growth, reduced cash
balance, no free cash flow for the cumulative period, a major portion of the assets side of the balance sheet is
other assets and investors of the company has lost money.
We can see that the management of the company plays an important role in making a company successful and
survive during the worst period also.
Berkshire has made an investment into MidAmerican Energy Holdings in the year 1999 for $35.05/per share and
per-share earnings of MidAmerican Energy Holdings in the year 1998 was $2.01 (P/E 17.44x, Earning yield of
5.73% - US interest rate during the year 1999 was similar to earning yield).
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View on Derivatives
We should wait for the opportunity which is falling under our criteria and till that time we should be inactive. We
should work for staying into the game rather than try to hit on each and every ball thrown to us.
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I will be going to make a detail explanation regarding weak earning quality later on. But I learn from my Guru
that we need to start analyzing every company by considering it as a "Chor" so that we will not be biased about
the company. If our process proves that the company has not a weak quality of financial then only need to
consider the company as a clean company.
Mr. Buffett has again mentioned waiting for an opportunity which matches our criterion.
Director of the company should have the freedom to make an independent decision and they also should be an
owner of the company so that their interest and interest of shareholders will not have any kind of conflict.
One of the lesson if there is a bubble scenario and we know that price at the business traded is much higher than
what actually an intrinsic value of the business then we need to sell out our position.
Indian example
One of the wealth creator from IT segment. If we have sold out shares during an IT bubble period year 2000 at
half price Rs.140 from the high price Rs.279. then we have lost return of 9% CAGR since the year 2000 (current
price Rs.650). Now, we have bought Nifty Bees from those sold amounts then we have earned 13% CAGR till now.
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Mr.Buffett has explained why many of the investors do not able to create wealth by investing into the equities.
When we trade extensively then we incurred an additional cost which reduces our return. Also, many of us follow
tips of others and rely on others which also reduces investment return. Many of people start investing when
market continuously moving into upward direction with the fear of losing an opportunity to earn and get exit
from the market when the market starts moving downward with the fear of losing investment. Rather we should
increase our investment when the market is continuously moving downward.
Mr.Buffett has been explained that one of the ways to survive into the commodity-like business is to become a
low-cost producer. Commodity business generally does not have pricing power and prices of a particular
commodity are decided based on the demand & supply of a particular commodity so that they have to focus on
the costs.
Investment + Cash per share at Berkshire Hathaway -
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Per share value of non-insurance business -
During January - 2006, the price of a share of Berkshire Hathway - A was traded at $90,000.
Mr. Buffett’s thought on Moat -
The strong moat can result in a strong flow of float. If the company having a moat then the company has the
ability to raise prices, getting the float, higher return ratios, raising market shares, etc.
Indian Companies Examples
One of the two-wheelers and commercial vehicle manufacturing company of India
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One of the four-wheeler manufacturing company of India
We can see that float is also getting compound over a period of time which benefits to the company to survive
for the long-term and to create wealth.
Why investors are not able to make money through the company can earn well -
Warren Buffett answer for his currency derivatives position -

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We need to focus on avoiding mistakes which can spoil out our wealth. If we focus on avoiding mistakes then
half of the battle, we won.
Mr.Buffett on Walter Schloss -
Mr.Buffett on people who clone others’ portfolio -
Mr. Walter Schloss is one of the investors who have an influence on my investment decisions. I keep his advice
always with me. (Published at Safal Niveshak –
https://1icz9g2sdfe31jz0lglwdu48-wpengine.netdna-ssl.com/wp-content/uploads/2015/01/Walter-Schloss-16-
Rules-to-Make-Money-in-Stock-Market.pdf )
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Posted on December 1, 2018
Businesses – The Great, the Good and the Gruesome
One of the concepts which are essential to understanding making an investment and value to the business.
Many of us focus on the story builds for a particular business and make a hope investing rather than focusing on
the actual reality. I always quote- "Stories are for kids, not for investors." We need to focus on the ability of the
company for creating access return on invested capital (Access return means higher than the cost of capital) and
that should be sustainable for a longer period of time.
Mr.Buffett has always put a huge emphasis on the business which has a moat and earns consistently higher return
compared to the cost of capital.
See’s Candy as an example of Great business -
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Indian Companies example for Great business
One of the two-wheeler and commercial vehicle manufacturing company
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One of the FMCG Company
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One of the Assets Management Company
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Here, the company does not require to make a huge investment to earn more money. Float itself take care of
the major requirement of the invested capital. Many a time float covers working capital as well as fixed assets
requirement. Due to such nature, Profit earns from operation majorly gets to the investment and cash so that
investment and cash to the company is compound which also provides benefits to the business.
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Good Business -
Good business which does not have float available with the business or least float available with business,
company has to invest money which they earn from profit, and sometimes little external funding also requires.
Indian Companies example for Good business
One of the company from tableware industry
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One of the pharma company
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One of the Tea manufacturing company
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Gruesome Business -
A gruesome business which does not have float available with the business, company has to invest money which
they earn from profit, and also external funding requires to earn little profitability, sustaining the business or
further growth. Here, huge capital is required to run a business.
Mr.Buffett has quoted an example of U.S. Air, He acquired a preference share of the company in the year 1989
and sold at the year 1998 with a huge gain. After that company gone for bankruptcy for the twice. The airline
business is a cyclical business, huge dependence on the prices of crude oil and during the year 1998-99, crude oil
prices were at the bottom (near to the price at the year 1988). So that profitability gets improved for the year
1998-99 and after that crude has never come back to those price level, which has affected to the profitability of
the company.
Indian Companies example for gruesome business
One of the telecom company of India
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One of the logistics company
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One of the steel manufacturing company
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We have to use a different valuation matrix for each category of the businesses and cannot provide a similar
valuation to each category of businesses. We cannot give the same value to pour water and to dirty water. Yes,
it is true that we can make process and pour dirty water but for that, we need to bring more capital and many a
times, few qualities of water will be lost during the process of dirty water to pour water.
We have to sell out our position into the cyclical business at the proper time or else we stuck with the business.
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Indian company’s example
For how to enter to the cyclical businesses, kindly visit - WARREN BUFFETT’S LETTER – 1987
Now, for taking an exit from cyclical businesses - When margin approaching towards a previous high margin, we
should start to exit from a cyclical business. We need to track the price of the commodities as well as quarterly
operating margins.
Sugar companies
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Cement Company
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When there is a pessimism into the market then we get an opportunity to buy a good business at a discounted
value. But during a euphoric time period, good businesses are available at a sky-high value.
Indian companies examples
One of the wealth creator IT Company during an IT bubble
One of the wealth creator IT Company during an IT bubble
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One of the two-wheelers and commercial vehicle manufacturing company was available at a discounted value
during pessimism of the year 2008
What is avoided by Mr. Buffett and Mr. Munger ---
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Mr. Buffett on derivatives -
One of the infrastructure company
One of the electric motors, generators, transformers manufacturing company
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Mr. Buffett on debt-
Example - SIMPLE IS BETTER – ISSUE -4 – Mr. EMI V/S Mr. SIP
Mr. Buffett on crowd mentality-
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Mr. Buffett on Repurchase of shares -
One of the Pharma Company of India which has sold one of the business segment into the FY2011 and company
becomes a Cash bargain. The company has done a buyback at that time.
The company has a total Cash balance of Rs.1770.28 crore + Upcoming cash due to the sale of the business worth
of Rs.7136.00 crore = Rs.8906.28 crore. And the company was available at MCap of ~Rs.7830 crore. Entire
continuing business was not given valued by the market.
One of the two-wheelers and commercial vehicle manufacturing company has done a buyback in the year 2009
The company has a total Cash balance of Rs.1260.05 crore. And the company was available at MCap of ~Rs.608
crore. Entire continuing business was not given valued by the market.
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One of the metal company in the year 2016 has come up with the buyback. In the year 2016, the price of iron
ore was traded lower.
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Company had a cash balance of Rs.14806 crore in FY16 and PAT of Rs.2517 crore. Company was available at
MCap of ~Rs.28440 crore. Entire continuing business ex-cash was available at 5.94x of PAT (MCap Rs.28440 crore
- Cash Rs.14806 crore + debt Rs.1497 crore = Rs.15130.86 crore; EV Rs.15130.86 crore / PAT Rs.2517 crore =
5.94x).
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Mr. Warren Buffett has explained on the commodity to brand-
One of the plastic product manufacturing company which use crude oil & it’s derivatives as a raw material but
due to selling a brand company can increase a profit higher than growth to the sales
One of the footwear manufacturing company which use rubber, plastic I.e. crude oil derivatives as a raw
material but due to selling a brand company can increase a profit higher than growth to the sales
Mr.Buffett on investing-
When we make a compromise with our need and make an investment of those savings to the proper assets, we
can able to receive more purchasing power in the future. We need to majorly focus on the beating inflation for
the longer period of time which will provide us a more purchasing power in the future. Our minimum target to
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earn a return from our investment should be inflation rate + GDP growth rate. This is an appropriate return which
will provide us a more purchasing power in future and also build us wealthier. During the current scenario in
India, inflation rate 3.77% + GDP growth rate 8.20% = 11.97%, it should be a minimum threshold return from the
investment we make.
If we look at the 10 years average inflation rate and GDP growth rate in India then it is 7.71% and 7.17%
respectively. So that if we have made an investment in the year 2007-2008 than we should have minimum
threshold return of 14.88%. And for the last 20 years is 14.60%.
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Mr.Buffett on intrinsic value creation -
Mr.Buffett on capital-intensive business -
We can use a similar parameter for analyzing a capital-intensive business. Here, we can check that whether the
company has higher interest coverage after paying current year interest cost or not. This parameter indicates
that the company can pay comfortably interest cost on additional borrowing or not. Such quality will not easily
available with all the capital-intensive companies so that we can able to filter out good company from the capital-
intensive business segment.
One of the FMCG Company which is the manufacturing and marketing of household products and personal
care products
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One of the laboratory business company of India
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Mr. Buffett has mentioned that they have made a repurchase of Berkshire shares during the year 2012 which
enhance intrinsic value per share and that provides a benefit to the shareholders who are continuing with the
company.
Examples of Buyback - SIMPLE IS BETTER – ISSUE -13 – BUYBACK
Mr. Buffett on the Heinz investment -
I learn investment to fixed income instrument from my Guru. ZEE Entertainment has issued preference shares to
the equity shareholder of the company with the condition to pay 6% interest payment and redemption of
principle starts from FY18.
Preference share was available at Re.0.80 and face value of that is Re.1.00. If we consider total cash inflow to us
in form of interest payment + principle repayment then we can able to earn ~10.75% IRR for the FY14-22. Here,
the present value of all future cash inflow @ 10.75% is Re.0.80 which is also higher than our purchase price which
indicates safety also.
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NTPC has issued debenture to the equity shareholder of the company as a bonus with the condition to pay 8.49%
interest payment and redemption of principle starts from FY23.
Debenture was given as a bonus and ex-date of debenture was 20th March 2018. If NTPC was purchased on 18th
March 2015 then price of NTPC was ~Rs.153.74 (with brokerage + other charges) and if we sell NTPC on Ex-date
then price of NTPC was ~Rs.144.70 (with brokerage + other charges) so that cost for getting bonus was Rs.9.05
and the face value of that is Rs.12.50. If we consider total cash inflow to us in form of interest payment + principle
repayment then we can able to earn ~14.02% IRR for the FY15-25. Here, the present value of all future cash
inflow @ 10.75% is Rs.10.90 which is also higher than our purchase price which indicates safety also.
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In both the cases, the interest rate on risk-free investment was ~8-9% and we are getting higher return compared
to it.
Mr. Buffett on investing -

During, the year 1973 to 1981, farm prices had a bubble situation. When the bubble burst, then leverage farmer
and lender both had a troublesome time. And after that Mr. Buffett had made an investment into the farm.
Mr. Buffett also made an investment into the other commercial property.
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Mr. Buffett has explained investing lessons -
In our investment to stocks, we are get affected with the stock price fluctuation and listen to the pundits for their
comments. Due to such habits, we cannot sit quietly with our investment and we end up with little or no return.
Mr. Charlie and Mr. Buffett always made an investment as they are buying an entire business. They check
whether they can estimate future five years of earnings or not. If they can estimate earnings then check whether
available at a reasonable price or not. If either of the condition does not match then they move on to the other
prospects.
For non-professional investors, they can make an investment into the index fund and accumulate it over a period
of time.
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Mr. Buffett mentioned Investors behavior which affects the investment return -
Unexpected behavior from Stanton in the year 1964 -
Why Mr. Buffett has bought Berkshire Hathway at the year 1962 -
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Example of Indian companies
One of the air-cooler manufacturing company of India was available below the book in the year 2009
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One of the two-wheelers and commercial vehicle manufacturing company was available below book value in
the year 2008 and below cash in the year 2008 and 2009
Charlie Straightens Me Out
The initial period of years, Mr. Buffett engage in the buying bargains (cigar-butt) strategy which he learns from
Mr. Graham. The major weakness of the concept mentioned by Mr. Buffett is “Cigar-butt investing was scalable
only to a point. With large sums, it would never work well.”
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Here, I have also made a blunder but luck by chance got saved.
Mr. Munger has an impact on the Mr. Buffett which has helped to Mr. Buffett to evolve cigar butt strategy to
wonderful businesses at favorable prices. Many times, Mr. Buffett and Mr. Munger does not get agree but they
never ever have made any arguments. When such scenario arises then Mr. Charlie end up a conversation with
saying “Warren, think it over and you’ll agree with me because you’re smart and I’m right.” Mr. Buffett has
accepted that transformation was not easy but he has done it.
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Similarly, India has a GDP growth rate of 7.20% and population growth of 1.10% which increase to the per capita
growth by 6.10%. if we consider average per capita growth rate of around 5% for coming 20 years then it will
reach the gain of 100%+. So that per capita will increase to $3927+ from $1963.55 currently, which will enhance
the standard of living of our future generation.
Mr. Buffett has explained mistakes of acquiring businesses -
Mr. Buffett on assets funding through debt-
Mr. Buffett on fear -
When we are fearful with our investment decisions then we focus on the each and every aspects which can result
in the erosion of the capital. When I make an investment, I assume that from the next day of my investment;
1929 great depression will hit so whether I survive or not? Survival should be much more important to build a
wealth which is not focused if we do not remain fearful with our investment.
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Mr. Buffett on the repurchase of shares -
Many companies are coming up with the repurchase of shares, we should consider that whether repurchase did
at a discount to the intrinsic value or at a premium. If a company is paying a premium to repurchase shares then
it will not benefits much to the shareholders. If any company make a decision to repurchase shares at a discount
to the intrinsic value then we should look for the company. Many companies which are into commodity business
or into the cyclical nature of the business also make a repurchase share during the worst time.
Examples of Buyback at discount to intrinsic value, cyclical company’s buyback, companies which have done a
buyback rather repay debt - SIMPLE IS BETTER – ISSUE -13 – BUYBACK
If our investment does not provide us with protection against the inflation then we should not stay for a long
term with a particular investment. Our first motive for making an investment should be protected against
inflation and then create wealth for the long-term horizon.
Read for more detail: Warren Buffett’s Partnership Letters, Warren

Buffett’s Letters
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Love to read again and again
 Samit Vartak: ‘Buy and Forget’ vs ‘Active Investment Management’

 Warren Buffett - HBO Documentary
My Popular articles
 LEARNING INVESTMENT LESSONS FROM MOVIE CHAL MAN JEETVA JAIYE

 WHY CONSIDERING ROCE (RETURN ON CAPITAL EMPLOYED) WITH ROE (RETURN ON EQUITY) IS
BETTER????
 WHAT IS ROE (RETURN ON EQUITY)? AND WHY ALWAYS CONSIDER DEBT WHEN CALCULATING ROE?
Simple is Better Series
Issue - 1 Issue - 2 Issue - 3 Issue - 4 Issue - 5 Issue - 6

Issue - 7 Issue - 8 Issue - 9 Issue - 10 Issue - 11 Issue - 12
Issue - 13
Disclaimer
Above article is just my perception, and perception can be wrong. For me, my perception can be right but for
others, it might be wrong.
I am Grateful to
I am really grateful to - Mr. Neeraj Marathe Sir, Prof. Sanjay Bakshi Sir, Mr. Vishal Khandelwal Sir, Dr. Vijay Malik
Sir, Mr. Rajeev Thakkar Sir, Mr. Raunak Onkar Sir, Mr. Vijay Kedia Sir, Mr. Howard Marks, Mr. Warren Buffett,
Mr. Charlie Munger, Mr. Benjamin Graham, and Mr.Walter Schloss.
I am really grateful to my parents and almighty for providing me always support whenever I needed.
I am grateful to one of my friend who has make editing to the few of the articles.
Please forgive me, if I forget to mention any person who has contributing value to my journey.
Author: Jimit R. Zaveri (Founder of Lucky Idiot)
Blog address: https://jimitzaveri.wordpress.com/
As a founder of Lucky Idiot; My mission through “Lucky Idiot” is to educate novice investors and to
distribute learning to more and more people in a simple manner.
Follow me: @ Twitter Jimit Zaveri
164 | P a g e

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BIBLIOPHILE WARREN

1 – WARREN BUFFETT’S LETTER – 1957 - 1959

Warren Buffett’s Letter - 1957

Warren Buffett’s Letter - 1958

Warren Buffett’s Letter - 1959

2 – WARREN BUFFETT’S LETTER – 1960 - 1961

Warren Buffett’s Letter 1960

Warren Buffett’s Letter 1961

Mr. Buffett used 3 method of operations as below -

3 – WARREN BUFFETT’S LETTER – 1962 - 1963

Warren Buffett’s Letter 1963

Dempster Mill Manufacturing Company

Mr. Buffett’s investment philosophy says –

4 – WARREN BUFFETT’S LETTER – 1964 – 1965

Warren Buffett’s Letter 1964

Warren Buffett’s Letter 1965

Workouts and Controls remain unchanged from the previous series.

5 – WARREN BUFFETT’S LETTER – 1966 – 1968

Warren Buffett’s Letter 1967

6 – WARREN BUFFETT’S LETTER – 1969 – 1970

Mr.Buffett has made a comment on the fund management business -

Warren Buffett’s Letter 1970

Mr.Buffett stated his criteria for purchasing bonds.

7 – WARREN BUFFETT’S LETTER – 1971 – 1975

Warren Buffett’s Letter 1972

Warren Buffett’s Letter 1973

Warren Buffett’s Letter 1974

Warren Buffett’s Letter 1975

8 – WARREN BUFFETT’S LETTER – 1976 – 1979

Warren Buffett’s Letter 1977

He mentioned his investment criteria as -

Warren Buffett’s Letter 1978

Warren Buffett’s Letter 1979

9 – WARREN BUFFETT’S LETTER – 1980 – 1981

Warren Buffett’s Letter 1981

10 – WARREN BUFFETT’S LETTER – 1982

Warren Buffett’s Letter 1982

Mr.Buffett has mentioned characteristics of cyclical industries-

The criterion which Mr.Buffett focuses while making an investment decision -

11 – WARREN BUFFETT’S LETTER – 1983 – 84

Warren Buffett’s Letter 1984

Mr.Buffett has mentioned the benefits of the repurchase of shares.

12 – WARREN BUFFETT’S LETTER – 1985 – 86

Acquisition of Scott & Fetzer

Warren Buffett’s Letter 1986

Acquisition of the Fechheimer Bros. Co.

Mr.Buffett on Accounting numbers -

13 – WARREN BUFFETT’S LETTER – 1987

14 – WARREN BUFFETT’S LETTER – 1988-89

Warren Buffett’s Letter 1989

Berkshire Hathway purchased preferred of the Gillette Co. -

Low depreciation cover companies

High depreciation cover companies

15 – WARREN BUFFETT’S LETTER – 1990-91

Example of PSUs & Private Bank