"Buffettology"

Table of Contents

Please note the Chinese title of this book

The Chinese title of the book I’m talking about today is “Buffettology“, neither “Warren Buffett’s Ground Rules” nor “The New Buffettology“!

The Chinese version of the book we are talking about today was published about 30 years ago and is out of print in Chinese.

About the Author

Who are the two authors?

The author is Mary Buffett and David Clark, among them Mary Buffett is the ex-wife of Buffett’s second son, which is why some people read her book. Mary. She has been Buffett’s daughter-in-law for 12 years.

David Clark, In addition to this book, I read Clark’s “Tao of Charlie Munger“. I have also mentioned this book in my previous two posts of “Munger’s most important work “Poor Charlie’s Almanack” and “Charlie Munger, a great investor worth remembering“. If you are interested in Munger’s investment philosophy, you should not miss this book.

Older works are better

Because Mary Buffett and David Clark’s book “Buffettology” was popular, the two collaborated on another book “The New Buffettology“.

If you can only choose one book to read, I would recommend Buffettology.

About this book

Reason to recommend

Mary. Buffett is the ex-wife of Buffett’s second son. The first reason I listed this as the reason for the recommendation is not based on gossip reasons. The main reason is that unless you are Buffett’s “family”, Buffett will personally teach your “family” how to invest in stocks in plain and easy-to-understand language from a family’s perspective. This is Mary. Buffett also repeats this in this book. This is the biggest highlight of this book. I repeat again, the word “family”.
This book discusses very fundamental, but definitely effective and correct investment concepts; there will not be any difficult or incomprehensible parts.
The author arranges the content of the book carefully; David. Clark is familiar with Buffett and Munger’s investment methods, which adds a lot to the content of this book.
The most important thing is: this book is suitable for novice investors, especially those who don’t know much about Buffett’s investment methods. This book is the best for you to read.

Main content of the book

Those who influenced Buffett’s investment style include Graham and Philips. Fisher, John. Williams, Lawrence. Bloomberg, Iger, Smith, Keynes, but the most important person is Charlie Monger.
Buffett once vowed not to invest before reading Graham’s famous book “Security Analysis” 12 times.
Buffett’s investment philosophy can be summarized in one sentence: “What to buy and at what price.” Please note: Buffett first decides “what to buy” and then decides “at what price to buy”, which is contrary to the way most people think.
Buffett’s actual investment behavior: companies that can reasonably predict future profits, generally have good financial conditions and prospects, can maintain high dividends and high profits, the purchase price determines the rate of return on investment, the expected rate of return determines whether to invest, long-term investment compound interest can reach 15%, and he makes money by managing other people’s money.
Charles Munger said in an interview with Forbes magazine on January 22, 1996, “Understanding the power of compound returns and the difficulties in obtaining them is the core of understanding many things.” “The goal is to buy a stock that does not distribute dividends, but returns 15% per year for 30 years, compounding progressive returns, and only paying a single tax of 35%, which means a return of 13.4% after taxes.”
The latter part of this book mentions two major topics: the first is the calculation of long-term compound interest and retained earnings, and the second is arbitrage trading. The author actually lists many examples of Buffett’s transactions for illustration. If readers can patiently study these cases carefully, it will definitely be helpful.

How to find companies worth investing in?

In Chapter 16, the author lists the following points on how Buffett finds companies worth investing in. Please try to ask investors the following questions:

Question 1: Does the company have obvious market monopoly characteristics (consumer monopoly)?
Question 2: Is the company highly profitable and growing?
Question 3: Is the company pursuing a more conservative financial strategy?
Question 4: Can the company maintain a high return on equity on a regular basis?
Question 5: Does the company retain its earnings?
Question 6: How much will it cost the company to maintain its current operations?
Question 7: Can the company freely use retained earnings to reinvest in other new ventures, expand operations, or repurchase its own stock? How capable is the company’s management in handling the above issues?
Question 8: Can the company adjust its product prices at will to reflect inflationary pressures?
Question 9: Can the added value created by a company’s use of retained earnings increase the market value of the company’s stock?

Disclaimer

The content of this site is the author’s personal opinions and is for reference only. I am not responsible for the correctness, opinions, and immediacy of the content and information of the article. Readers must make their own judgments.
I shall not be liable for any damages or other legal liabilities for the direct or indirect losses caused by the readers’ direct or indirect reliance on and reference to the information on this site, or all the responsibilities arising therefrom, as a result of any investment behavior.