Jun 18, 2005 02:37 PM
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(Updated Jun 18, 2005 02:37 PM)
Warren Buffet who runs a company called ''Berkshire Hathaway” is the richest person in the human history not long ago. May be Mr. Bill gates occupied this place and Warren Buffet is second to him. Warren Buffet is and has been an investor on the stock market and his company is some what like a mutual fund in India holding money of the public and Warren Buffet invests that money in shares of the companies listed on the Wall Street. Warren Buffet himself personally holds great percentage of ''Berkshire Hathaway'' which makes him the world's richest man.
The book gives a detailed description of how Buffet invests in the shares and stock of a company. What is his strategy? What are his opinions and what he speaks and what he writes.
If you chance upon meeting Mr. Buffet at a street corner you might probably mistake him to be a school head master or railway station master. He is a disciplined person and his emotions totally under control. He lives faraway from New York in a city called Omaha in a state called Nebraska of USA. His company in Omaha employees not more than 50 people and he would not use a computer to understand the market trends because he does not try (even if you were to ask him) to understand the market trend. He would not take any advice from financial whiz kids who might advice him on the economic situation of the country because he does not need to understand the economic prospects of the country. He would not need to know weather the death or calamity would close down the stock market because it does not matter to him weather stock market is closed or open on that day and believe me it hardly matters to him if it were to be closed for the next ten years. It does not matter to him if his share prices which he might have purchased with great enthusiasm had fallen by wayside in the rush of the stock market and prices of his shares have gone down by 50 %. It does not matter to him at all.
I know what you are thinking. You might probably think that I am telling you nice practical joke to entertain your reading. Not at all. I am in fact telling you the truth about world's greatest investor called Warren Buffet. !!
If you do not believe me then you have to read this book called
''the Warren Buffet Way'' written by Robert G. Hagstrom.
The author himself is a fund manager of ''Legg Mason Focus Trust''.
I purchased this book in book exhibition. It is not a very big book and available in 1/4 dummy size.
The book makes clear cut post mortem of all the investments of Warren Buffet. The entire information is extracted out of annual results published by “Berkshire Hathaway'' company as per legal requirement and they were all well written by Buffet himself. Buffet enjoys himself teaching investment techniques. He enjoys much more by writing investment strategies.
The author never ever interviewed Mr. Warren Buffet!! . Though he had written this book on Buffet's investment strategies.
This book is advisable to all the investors in the stock market. There is absolutely no doubt about it . The book makes it clear what exactly is stock market from Buffet's point of view. The book providers a wonderful insight in to a great philosophy called ''Value investment method'', though in fact Warren Buffet learned this Value investment strategy from his teacher, guide and mentor called ''Benjamin Graham''.
The book makes it clear that Warren Buffet may be a five sigma event and all those who read and follow the methods of Buffet would not or may not become as super rich as Warren Buffet. In fact Buffet himself may not achieve the growth (growth in value of his investments in shares and stock) in future at least as much as he achieved so far.
The book begins to elucidate the principles of Buffet's investment philosophy with the investments he made. For example if Buffet invested in GEICO, or Gillette Company, the author would begin to analyze it threadbare. That is all right as far as author is concerned. But for a discerning investor it looks like a postmortem and more specifically what I felt was that it all looked like a reverse engineering.
It is like some one who knows my life story looking in to my horoscope. The astrologer (in the place of author) might easily correlate all my misfortune and good luck to the placement planets, their degrees and zodiac signs. But he may go totally wrong in his predictions for my future.
At the same time I am not in any way undermining the importance of this book. It is a must for all the serious investors in the stock market and also not so serious casual, once in a life time investor. It is because the Warren Buffet's methods are ''how not to lose money rather than how to make a fast buck''.
A value investment essentially speaks about the methods to calculate the real or intrinsic value of a company before you can buy shares in that company. This strategy tells that the price in the stock market of particular company may not truly represent it's real worth. It may be very lower or very higher than its real worth. But as Buffet says in a long run stock market very strikingly represents a company's real value. It means the price of the share would definitely go up sooner or later because the stock market has wonderful quality of recognizing the company at some point in time. This argument is what you have to read in the book.
There is another great flaw in the book.
I am also an investor so I can tell you one important point.
There has been a great research even by university scholars who tried to find what finally gives money to the investor. Is it the price increase Or the dividend payment ?. Which one is most important ? which benefits the investor finally ?
A research scholar who had done research on Wall Street on it's 50 year old history found that it was the dividend payment that would be immensely beneficial to the investors in real terms and not price increase or the decrease.
The book is almost silent on Dividend pay outs and their significance except to find out a really worthy share (to buy) because when the management do not know how to invest the earned money of a company it would either give away this money to shareholders in the form of dividends or invest it properly so that ''return on investment'' would be high. This ''return on investment'' is one of those value principles( nearly a dozen) to find out good companies for investment.
Read this book and understand those principles and also you can read how those principles “wonderfully fit in” in whatever Mr. Buffet chose to invest.
But why he chose only those companies when it might be that so many other companies might as well be “wonderfully fit in” to the principles of Mr.Buffet ?
In any case the companies those Warren Buffet had chosen to invest made him the world’s richest man.
