Saturday, 25 February 2012

What is Warren Buffett's investing philosophy?

Buffett's investment philosophy has changed over time and can generally be thought of in two parts:

  • Early Buffett (pre-1970): buy at a significant discount to intrinsic value. "Fair business at a wonderful price."
  • Late Buffett (post-1970): buy companies at a price at or near intrinsic value, that can consistently increase their intrinsic value,.  "Wonderful business at a fair price."

He has said that the latter philosophy is far superior to the former and that it took him far too long to realize it.  Buffett's investment philosophy certainly evolved over the course of his investing lifetime, and did shift towards more of a focus on quality rather than cheapness, in part due to his association with and learning from his business partner Charlie Munger.  The intellectual father - the "Benjamin Graham," if you will - of this quality focus was Phil Fisher.  Generally, Buffett is a value investor; he studied under and worked for Benjamin Graham, the author of The Intelligent Investor and Security Analysis and the man generally considered the father of modern-day value investing, and credits Graham for much of his investment philosophy and success.

The best way to truly understand Buffett's investment philosophy is to read the following (links below):
1. His letters to investors from his early investment partnerships
2. His letters to shareholders of Berkshire Hathaway
3. The Intelligent Investor by Benjamin Graham
4. Common Stocks and Uncommon Profits by Phil Fisher

Early Partnership Letters (1959-1969):

Berkshire Hathaway Letters (1977-2010):

Intelligent Investor:

Common Stocks and Uncommon Profits:

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