If you want to learn about Warren Buffett’s life, you should read his biography by Roger Lowenstein.
If you want to learn about his investment approach, you should read The Warren Buffett Way.
If you want to learn about his investments, check out Glen Arnold’s new book, The Deals of Warren Buffett: Volume 1, The First $100m.
Glen Arnold’s book covers 22 investments, in chronological order, from Cities Services in 1941 (Buffett was 11 years old) to Wesco Financial in 1974. There is quite some overlap with Yefei Lu’s book, Inside the Investments of Warren Buffett.
Arnold’s book helpfully summarizes Buffett’s thought process for each investment and provides the key figures that Buffett has at his disposal. The author offers at the end of each chapter some useful learning points stemming from these case studies, of which I selected nine:
- Look for pricing power (Dempster Mill). The ability to spot the potential for raising prices because of some degree of customer captivity was evident time and again in Buffett’s career.
- When the odds are good, invest a lot (American Express). Buffett invested up to 40% in American Express in the 1960s.
- Businesses needing little additional capital to generate increased profits can be a goldmine (Disney). Such business can produce very high returns on capital employed.
- Be prepared to observe a good company for years before investing (National Indemnity Insurance). This is why I keep a watchlist.
- Hold on to a good thing for years (National Indemnity Insurance).
- Good jockeys will do well on good horses, but no on broken-down nags (Hochschild-Kohn).
- Partner with keen cost-cutters (Associated Cotton Shops).
- Float is a very useful way to leverage (Blue Chip Stamps). Mohnish Pabrai expands on this here.
- Evaluate what is in the mind of customers (See’s Candies). This is closely linked to the pricing power point.
I recommend The Deals of Warren Buffett to beginner investors who want to develop sound investment principles.