Generals: Investments in broadly undervalued securities bought for their margin of safety and long term appreciation, often moving with the Dow but delivering superior results over time despite vulnerability in downturns.
Work outs: Special situations driven by corporate actions like mergers, liquidations, reorganizations, spin-offs, etc that provide predictable, stable returns, often insulated from general market swings and sometimes financed with modest borrowing. These are securities whose financial results depend on corporate action rather than supply and demand factors created by buyers and sellers of securities
Control situations: Large or controlling stakes in companies aimed at influencing policies, requiring multi year horizons and patience, occasionally evolving from generals when prices stay low long enough to accumulate significant ownership.
Question 2:
Control situations are nowadays constrained by disclosure rules and institutional resistance. Disclosure rules (13D filings in the U.S.) force investors to reveal stakes above 5%, so stealth accumulation is no longer possible. Once a 13D is filed, arbitrageurs, hedge funds, and even retail traders often front run the investor by buying shares, pushing the price up. (“leakage”) .
Question 3 :
From deep value, cigar butts, he leaned into qualitative analysis, focusing on brand strength, customer loyalty, and long-term franchise value.
Question 4:
Buffett’s decision to return funds stemmed from a variety of factors such as market, structural, and personal. By the late 1960s, the kind of quantitative bargains he had relied on for years had largely disappeared, leaving him with fewer opportunities that matched his investment style. His fund’s size which grew close to about $100 million, further restricted him, since meaningful commitments had to be at least $3 million, effectively shutting him out of the mid & small-cap arena where he had once thrived.
At the same time, the broader market had become increasingly speculative and short-term oriented, a climate that clashed with his preference for patient, long-term investing. On top of these external challenges, Buffett faced personal limits: he admitted that as long as he was “on stage,” managing nearly all of his partners’ net worth and publishing regular performance records, he could not half commit. I have a sneaky feeling that he got into the trap of measuring performance every year and probably stressed himself too much to beat benchmarks ? Why do I say this ? “At the beginning of 1968, I felt prospects for BPL performance looked poorer than at any time in our history… We established a new mark at plus 58.8% versus an overall plus 7.7% for the Dow” sounds like painting into a corner .
Transition into a holding company model which he eventually did . It gave him permanent capital and freed him from the constant pressure of publishing individual partnership performance . It also enabled him to acquire entire businesses, reinvest retained earnings, and compound value within the company without tax friction from distributing gains to partners
Question 5:
My personal favourite is Amex. It’s easier for me to understand than others like Dempster, atleast narrative wise.
Allied cheated Amex with sea-water instead of salad oil and when the news broke out, the share price of American Express fell by more than 50%. Buffett, however, recognized that while the company’s balance sheet had taken a hit, its core franchise, the brand & trust of millions of cardholders and merchants remained intact. He invested nearly 40% of his partnership’s assets into American Express stock, betting that the scandal was temporary and that the brand’s reputation would recover.
The stocks seems to have paid off for more than 5 years when he says “substantially outperformed the general market in 1964, 1965 and 1966 and because of its size (the largest proportion we have ever had in anything – we hit our 40% limit) had a very material impact on our overall results and, even more so, this category. This excellent performance continued throughout 1967 and a large portion of total gain was again accounted for by this single security.”
Question 6:
It had to be dempster . Too much work withunimpressive management that delivered poor earnings, forcing him to intervene directly. Multiple tender offers failed before he finally gained control, and once in charge he had to oversee a hands on turnaround, dealing with bloated inventories, unprofitable branches, and inefficient operations. Even after Harry Bottle’s successful restructuring, Buffett ran into heavy corporate tax burdens and the rapid exhaustion of tax loss carry forwards, which created pressure to restructure or sell. Several advanced sale negotiations collapsed, leaving him scrambling until a last minute asset sale went through. In the end, the investment was profitable, but the process was messy, draining, and dependent on liquidation and financial engineering rather than natural compounding—teaching Buffett why weak businesses, no matter how cheap, often come with unwanted headaches.
Question 7:
During the Buffett Partnership Ltd. (BPL) years, Buffett’s portfolio construction and risk management reflected a blend of Graham-style discipline and his own evolving philosophy. He divided opportunities into categories such as “generals”, “workouts” and “controls”.
Risk management was less about diversification in the conventional sense and more about structured analytical approach with margin of safety. Buffett concentrated capital in his best ideas, sometimes putting 30–40% of assets into a single investment and goes on to say “investment operations involve coupling an extremely high probability that our facts and reasoning are correct with a very low probability that anything could drastically change the underlying value of the investment."”
What I like is the varied range of style. He was a master of managing workload to balance between “generals”, “workouts” and “controls”.
What I didn’t like a bit is the fixation on measurement and comparisons with other funds etc
Generals - Stocks that are trading at less the intrinsic value, with no catalyst to bring the stock price in line with intrinsic value.
Workouts - These depend on a know corporate action that will bring a fixed price and so if bought at a low price will offer a know nearly guaranteed return.
Controls - Essentially generals where the partnership owns a large stake in the investment and needs to actively influence the company.
Question 2:
I think it would be more difficult to acquire significant blocks of stock as you now have to notify the market at certain ownership thresholds. Also if you run a fund you have to report all positions quarterly.
Question 3:
At the end of the partnership there was more of a focus on control situations running companies successfully. This is in contrast to the early days where the focus was forcing failing companies to distribute assets, close factories etc.
Question 4:
I think the decision was in the best interest of his partners, a very honest way to operate. Buffett was finding it more and more difficult to find investments that could make the returns above the Dow, a function of availability and the larger dollar amounts he was managing. I also suspect these investments were personally very difficult, they involved conflicts with management, laying off employees etc. His partners also had the option to continue to invest with him without paying fees in the form of there interest in Berkshire, but at the time it’s success and the level of Buffetts involvement would have been far from obvious.
Other options:
1. Continue the partnership, but shift his investment focus to running controlled companies. He preferred to be involved in these enterprises and so would have continued to be engaged. Returns would have likely started to converge with the index, which given the fee structure would have still made money out of the partnership, most managers would see this as an advantage, but not for Buffett.
2. Run the company as before but gradually return capital. This would address the issue of the size of the fund, but wouldn’t address either the availability of investments or Buffetts happiness with the work. There would also be a dilemma of whether Buffett should retain his wealth in the fund or withdraw money - he would be accruing wealth faster than the other partners because of fees. If he retained his wealth in the fund it would dilute other partners, if he didn’t his outside investment may have been of more interest to him.
I think most investment managers would have chosen one of the other options, which is a testament to Buffetts integrity.
Question 5:
I can’t say any of the investments were a particular favorite, but I suspect that’s a function of why they were so profitable. In order to be so statistically undervalued in the first place, they would have to have some combination of being boring, not having an exciting future and some degree of mismanagement - these were not the stock someone would be bragging to there friends and neighbors about!
Question 6:
Sanborn Maps didn’t seem like a pleasant experience, working with an uncooperative board of directors with not real stake in the business.
The most confusing investment was Berkshire Hathaway, I had to keep reminding myself that firstly it wasn’t the business it is today and secondly Buffett was not managing it!
Question 7:
The portfolio was very concentrated, with I suspect about 20 stocks and on occasions large positions of 20%+ in a single stock. The portfolio was selected by selecting the stocks with the highest likely pay off, but a very limited chance of going to zero.
Question 8:
1. Depth of Research (shallow 1 to deep 10) - 8
2. Portfolio Concentration (concentrated 1 to diversified 10) - 2
3. Quantitative (1) vs. Qualitative (10) - 5
4. Business Analyst (1) vs. Security Analyst (10) - 1
5. Time Horizon (short 0 to long 10) - 5
6. Investing Universe: Asset Class - Equities
7. Investing Universe: Market Cap - Any
8. Investing Universe: Geography - US
9. Investing Universe: Sector Focus - None
10. Absolute Return Focus (1) vs. Relative Return Focus (10) - 7 (Focussed on relative returns, but skewed to underperforming (not that this happened!) in upmarket and overperforming in downmarkets)
11. Risk Tolerance (low 1 to high 10) - 3 (This depends how you define risk, Buffett had zero tolerance for permanently losing money, but was happy to see investments fall in value so the could buy more)
12. Bottom-Up (micro 1) vs. Top-Down (macro 10) - 1 (All that matters to Buffett is whether an asset is undervalued)
13. Financial Leverage (no debt 1 to any 10) - 3 (only used in work outs)
14. Growth Rate (any 1 to high 10) - 1
15. Activism (passive 1 vs. active 10) - 8 (His preference was to be passive, but very much would be active if required, I think this is an important aspect in the difference between Generals and Control situations)
16. Focus on Earnings (1) vs. Assets (10) - 7 (It’s difficult to say conclusively but I think the focus was on Assets, given the potential holding period earning must have been a consideration)
17. Technical Analysis (1) vs. Fundamental Analysis (10) - 10
18. Reversion to the Mean (1) vs. Escape from the Mean (10) - 1
19. Management Interaction (none 1 to detailed 10) - 8 (As with Activism )
20. Primary Research (none 1 to in-depth 10) - ? (There was no mention either way of this)
21. Long Only (1) vs. Long/Short (10) - 4 (There was a mention of using short in the Workouts and some other Generals, presumably as a hedge)
Question 9:
The letters consist of a large amount of repeated/similar text from one year to the next, for example the performance comparisons. I thought an LLM would be really useful for reducing this information into two parts, a summary of the repeated information and a breakdown of the yearly changes. I used Gemini and tried various settings and models but ran into various issues… Information being included from web searches rather than the letters, missing key information, inconsistent numbers. It was instructive to be able compare the actual contents of the letters to Gemini’s interpretation.
A solution to this is to force the model to produce code so exact comparisons can be made. My incomplete attempt at this was through these steps with matching prompts:
1. Split the code into in pdf’s for each year - “The following link are the buffet partnership letters. There is one letter for each year. I’d like the document splitting into one pdf for each year. The content is to be like for like.
<link>”
2. There are software tools that can be used to compare documents to see changes from one iteration to the next - “What python tools can I use to compare these pdfs?”
3. Step 2 only compared 1 year to another, I wanted to compare multiple years so I used this - “Are there tools that can compare multiple files”
This is nothing that couldn’t be done 10 years ago with the tools available and the right knowledge, however LLM’s reduce the requisite knowledge and the the time taken to build something like this.
It's interesting how you framed the whole Graham vs. Fisher debate. That line about them having more in common than what separates them realy hit home. It’s such a smart observation about intrinsic value. Makes you rethink things! Great stuff.
Question 1: What were the three different investment types that Buffett invested in? What do you think about each one?
1) Generals - Private Owner Basis - valuing unloved stocks at their fundamental value, but with an eye to quality too. Waiting until they improved and then selling. Classic Benjamin Graham.
Classic value strategy, with a quality and management twist
2) Generals - Relatively undervalued buying companies trading at a substantial discount to their peers and waiting for them to improve. Pass on those too complex or difficult to understand. Too large to count as Private owner basis but similar to 1) otherwise.
This is not really classic value territory, though it does lie within Graham's investment portfolio concept of strong repeatable earnings. It clearly generated substantial profits.
3) "Workouts": timetabled arbitrage situations where money can be made in relatively small amounts, but over a rapid and predictable timeframe.
I'm surprised he found enough of these; they would certainly be more risky and difficult now, I think.
4) Controls – buying a large part or all of a business and gaining management control to drive the outcome.
Here is one of the best of his strategies, and one he has continued to this day. There are risks, however, and I think he was lucky in some of his early choices of manager to improve the businesses he bought.
Question 2: What of what Buffett described would not be possible or be less effective today? Why?
As he says himself throughout the letters, the attractive low valuations prevailing in 1957 gradually shrank during the partnership years until there was little left in 1969. In May 1967 he says, "Opportunities for investment that are open to the analyst who stresses quantitative factors have virtually disappeared, after rather steadily drying up over the past twenty years." We are in a situation much more like 1969 than 1957.
Question 3: What changes have you observed in Buffett’s approach from the earlier days of when he began managing the partnership as compared to the later partnership years?
The early years were a straight application of Graham's principles. Gradually, however, he became more aware of quality and management and more prepared to buy a business and do real work on it to improve it, something that Graham never did. Finally he went the whole hog and started to buy entire businesses. Towards the end of the letters, he makes an admission that I found to be probably the most revealing thing he says in the letters:
"Interestingly enough, although I consider myself to be primarily in the quantitative school (and as I write this no
one has come back from recess - I may be the only one left in the class), the really sensational ideas I have had
over the years have been heavily weighted toward the qualitative side where I have had a "high-probability
insight". This is what causes the cash register to really sing. However, it is an infrequent occurrence, as insights
usually are, and, of course, no insight is required on the quantitative side - the figures should hit you over the
head with a baseball bat. So the really big money tends to be made by investors who are right on qualitative
decisions but, at least in my opinion, the more sure money tends to be made on the obvious quantitative
decisions."
Quite. And putting this together with his increasing difficulty finding quantitative winners, this is admitting that he had outgrown Benjamin Graham and knew that numbers alone were increasingly not the answer.
Question 4: What do you think of Buffett’s decision to return funds to investors? What would have been other alternatives and the pros/cons of each?
I think it was both logical and inevitable that the structure needed to change; it was complex, and the paperwork and answering to many different investors with very high expectations was, I suspect, getting more and more burdensome. On top of that, I think Buffett had an instinct that things were going to get much more difficult after the bumper year of 1969, and it was a good time to stop and return everyone a very nice cheque. I also suspect that he wanted to lose some of his investors, as he was finding it less and less of an advantage working at scale. Having less capital and more of his own skin in the game would make life easier and give him more manoeuvrability and long-term capital to deploy. It would also allow him to further develop the instincts for good investments outlined in the answer to question 3 and start with a clean slate and more autonomy and develop his philosophy of investing.
He could have founded a new permanent fund and rolled the money into it. But it would have been costly and drawn regulatory scrutiny, and he would still be left with a lot of capital to deploy in a dangerous-looking market, with new investors with no historical uplift to soothe the pain of any initial losses.
Question 5: What was your favorite investment that Buffett made during the partnership days? What made it your favorite?
Dempster Mill was my favourite. It was a classic. He valued it according to textbook Graham. He tried to get the existing management to change it. No discernible result. So he put in a fixer, who turned it round very promptly and produced a 100% or so return in a couple of years. (Note that Graham's textbook valuation was significantly too pessimistic. I am not surprised by this. I think that the haircuts he applies to assets are in some areas unreasonably harsh and simply don't reflect reality much of the time. Lesson: don't blindly apply rules; use reason and judgement.)
Question 6: What was your least favorite investment that Buffett made during the partnership days. What made it your least favorite?
Ironically... Berkshire Hathaway. The fundamental business was textile mills, which he knew were declining and poor assets, more belonging to the past than the future. He knew this for a long time and admits it. He built other businesses inside BH, like insurance, but why he did not restructure it to sell the mills a long time ago I still don't quite understand. From the letters, I think he just liked the people and the dependability of it, but it was sentimental and not a great use of his capital. He said:
"While a Berkshire is hardly going to be as profitable as a Xerox, Fairchild Camera or National Video in a
hypertensed market, it is a very comfort able sort of thing to own. As my West Coast philosopher says, “It is
well to have a diet consisting of oatmeal as well as cream puffs.”
Question 7: How did Buffett approach constructing his portfolio and managing risk? What do you like/not like about his approach?
He is not very candid about this in his letters. He claims that it is all down to good luck, but if it was, he rolled an unreasonably large number of sixes. When you look at what he does rather than what he says, it looks rather different. He has 3 main asset types, and he deploys money between them depending on conditions and the available opportunities:
Generals - market dependent: allocate more when the market is low and rising, reduce when fully valued
Workouts – market independent, good when prices are too high or declining for bread-and-butter reliable income.
Controls – partly market dependent: buy when the market is depressed, gain control and fix, which takes time. Hope to sell in a rising market but gets decent value even in a depressed one.
he is very concentrated, sometimes having up to 40% of capital in a single situation. He aims to have only a few positions, maybe 6 or 7. But because of the different characteristics of the 3 types of situation, the risk is spread, especially market timing risk, which he explicitly and many times in the letters says that he never tries to predict. So it makes sense to have a strategy that constantly mitigates against this market risk.
I admire this approach. The only problem is that it is hard for an ordinary investor to follow it. It is very high risk. Workouts are rare in the modern world, and controls beyond the wallets of most of us, so we are left with much less room to manoeuvre in highly valued markets.
Question 8: Map the Buffett from the partnership letters on as many dimensions of an investment style as you can think of. An example of a dimension: long-term vs. short-term, quantitative vs. qualitative, deep vs. shallow research, etc.
Generals, Workouts, and Control. Each had different methods for the price returning to value. For most of the partnership, Generals were cheap stocks relative to on asset value (private owner basis); company quality and long-range prospects weren’t the basis for value. Later, he expanded the General category to include higher quality business that were undervalued relative to similar companies on an apple-to-apple basis. When selecting Generals, he primarily valued on quantitative means and depended on market changes in price to bring about gains; he had no known reason for this assumption and no timetable. Workouts were also undervalued but those in which he depended on reliably known special situations to bring about change in a specific time window. Controls were undervalued companies in which they took positions that gave them authority to make needed adjustments to bring back (improve business) or realize value (liquidation).
For Generals, the thing that bothered me was not having a reason for a stock to appreciate. There’s a reason the market thinks it’s low and they are either right and something needs to change, or they are wrong and the company IS valuable and will eventually prove it. Workouts and Control require special skills and opportunities not all investors will have. As he himself said, he'd rather not run the company himself but leave other to do it. I agree.
Question 2:
Types of investment opportunities are different. The universe for very cheap yet undervalued stocks is small. Regarding Workouts, I question how many 'meters have time left' that haven't already gotten snatched up.
Question 3:
There are 4 changes I keyed in on. The first is a drift towards putting more weight on the qualitative. Early on he just mentions 'quality' as being important (as Graham did), but later he's more descriptive about what he's looking for, indicating that he's gaining clarity himself. The second thing is that he began to find less securities that met his standard. He was reduced to a 'trickle' of ideas for undervalued, cheap Generals because the market was pricing everything higher and higher. He also ran out of ideas/opportunities for Workouts and Controls. Thirdly, he had to change his performance goal due to the changes in the market that made it near impossible for him to meet while still holding to his investing philosophy. Lastly, he seemed less interested in flipping stocks and more interested in holding them when he believe them to be really great companies. He seemed to take joy in backing high-quality businesses and the people that worked hard to run them.
Question 4:
His willingness to stick to his principles is admirable and I believe he was trying to do what was best for his partners. Hindsight is 20/20. From my understanding, hid pullout before the crash in 1970 and subsequent decade plus it took to recover real value probably saved the investors a massive loss in purchasing power. I wonder his suggestions to move into bonds panned out given the effects of the inflation that followed. I have no educated comment on alternative methods to break up the practice, although I do wonder if there would have been a way for him to let another person take over if the other partners wanted to keep going.
Question 5:
Dempster Mill. They took a business that was failing, milked it, and with the help of the competent president Harry, turned a weak business into a better business. He noted that it was still working out for its eventual new owners when he sold it a few years later. I like this because its more in line with my non-financial concept of investment (enable transformation/create durable value).
Question 6:
Similar to the reasons as above, Sanborn is my least favorite because it was mostly about acquiring their investment portfolio, not improving the business. He discussed the theoretical value of the knowledge base of the map company, but that no one was doing anything innovative with it. I wonder if there could have been something done with it to also turn the business side around.
Question 7:
He took risk reduction very seriously. His portfolio performance affected many family members and that's strong motivation for one to be very risk aware--you don't want all your family hating you because you caused them to lose all their money! His strategy was based on classic Graham-like MOS (substantial excess value compared to the purchase price) and diversification. He also believe diversification by sheer quantity alone is not enough to compensate for potential destructive effects of 1 or 2 substantial inferior quality investment. He aimed to select only the best long-term opportunities and avoid the losers. Due to the limited number of quality ideas, he at times found himself in more 'concentrated' situations than tradition deemed 'conservative'. In this case, he only proceeded once he was able to determine that the odds of a single investment significantly impacting portfolio performance goals were infinitesimally small. His also found that using different types of investment strategies (generals, workouts, control) were beneficial in insulating the portfolio against big swings in the market.
I like how he mixes built diversification on more than just sector and quantity. I also agree with his point on how diversification and risk-avoidance are subjective based on expectations and the degree of variance in performance tolerable to the holder.
QUESTION 8
1. Depth of Research (shallow to deep): 6 -- paid attention to numbers, but hard to tell how much time he spent
2. Portfolio Concentration (concentrated to diversified): 5 -- started quite diversified, ended concentrated. Preferred to be more diversified, but not enough options towards the end
3. Quantitative vs. Qualitative: 3 -- very Graham, but starting to shift
4. Business Analyst vs. Security Analyst: 7 -- very Graham, but starting to shift
5. Time Horizon (short to long): 5 -- flipped when reached desired valuation
6. Investing Universe: Asset Class: Common stock, but on closing partnership, he talked extensively about bonds as options for his partners.
7. Investing Universe: Market Cap: Probably small to mid. They were not well followed or glamorous.
8. Investing Universe: Geography: USA
9. Investing Universe: Sector Focus: I don’t think he was picky about sector.
10. Absolute Return Focus vs. Relative Return Focus: Return relative to DOW (wanted to always do 10% better)
11. Risk Tolerance (low to high): 1
12. Bottom-Up (micro) vs. Top-Down (macro): 1
13. Financial Leverage (no debt to any): 5 -- I don't remember any statements on this.
14. Growth Rate (any to high): 1
15. Activism (passive vs. active): 10
16. Focus on Earnings vs. Assets: 7 -- asset-minded but earning aware.
17. Technical Analysis vs. Fundamental Analysis: 10
18. Reversion to the Mean vs. Escape from the Mean: 1
19. Management Interaction (none to detailed): 10
20. Primary Research (none to in-depth): 10
21. Long Only vs. Long/Short: 5
Question 9
Role: You are Warren Buffet in his partnership days. Use the original letters as your only source for determining his philosophy and methods.
Task: Suggest the type of portfolio one could attempt to build in today's market that would align with his principles in the partnership days. Especially keep in mind his thoughts on Diversification, Conservation, Compounding, and Objective measurements of results.
Second Task: Your goal is to find some examples of securities that would fall into the category of Generals, Workouts or Controls that one could consider if they wanted to build a portfolio as defined above and that meet the criteria according to what Buffet laid out in the Partnership letters.
Interesting that you did not like Sanborn maps. There is obviously no right/wrong answer but that one was one of my favorites since it was a clean activist special situation based on assets - classic Graham with a Buffett twist.
1. Generally Undervalued, Work-outs and Controls. The movement in the share price of generals was largely a product of changing market perception and the growth of the company with partnership involvement non-existent. These could be purchased with a margin of safety given market conditions. Smaller amounts of capital would be needed for this investment, but the time period to realize the return was largely unknown. The value of work-outs may be partially market driven, but the returns largely rests in the actions of management. The time it takes to realize the return was more knowable than in the generals. Buffett was able to exert more influence on the actions of a company in the Controls category. Each category has pros and cons. Liquidity decreases moving from generally undervalued to controlled while the ability to realize returns becomes more knowable and based more on the company itself rather than subject to market influences. Generals were judged using primarily using quantitative measures while qualitative measures were added in evaluating work-outs and controls.
2. I think that the work-outs would be be more difficult in today's market. There would be more competition from private/hedge funds or buy-outs.
3. Buffett included a group named generals- relatively undervalued which served to include the comparison of securities of similar general quality. He also began to include more qualitative measures in his evaluation of potential investments. He acknowledged in 1967 that the big money was made by those who were right on the qualitative side, while the more sure money was made on the quantitative side.
4. I believe that this was a good and selfless decision on his part. Market conditions had been frothy by his evaluation over several years. His clients could determine which was their own best course of action. He also made available the purchase of bonds.
5. My favorite is National Indemnity as it was one of his early insurance company purchases, although most of his purchased performed extremely well.
6. My lease favorite is Sanborn Maps primarily because of problems it had to solve and it's position in an economy that was changing.
7. Buffett uses both quantitative and qualitative tools to value companies he was considering for investment, whether they were generals, work-outs or controls. He then would make a purchase only as long as there was a margin of safety. He has been extremely clear about his approach as as Charlie has said, "I don't know why more people don't follow it". The approach has always made sense to me.
8. Investment dimensions:
long-term
company focused
contrarian - relative to the market
thorough research
primarily quantitative
a focused portfolio
9. Provide a list of 10 publicly traded companies which are trading below their intrinsic value and have earnings growth of over 10% per year.
How selfless was returning money to his partners really? After all, they still needed the money to be managed. It is not like he thought Bill Ruane would do better than him in a challenging market or that he could not exceed muni returns. I suspect the decision was far more about him than what was best for his partners going forward, but of course he has built so much value for them by that point that it is hard to fault him for wanting to lock in his track record and change to a better structure where he would not have to measure himself annually and respond to investor questions unless he wanted to.
He also talked about taking time off and was making trips to California. He knew he was very focused, so may have wanted to attempt having more family time.
Question 1:
Generals: Investments in broadly undervalued securities bought for their margin of safety and long term appreciation, often moving with the Dow but delivering superior results over time despite vulnerability in downturns.
Work outs: Special situations driven by corporate actions like mergers, liquidations, reorganizations, spin-offs, etc that provide predictable, stable returns, often insulated from general market swings and sometimes financed with modest borrowing. These are securities whose financial results depend on corporate action rather than supply and demand factors created by buyers and sellers of securities
Control situations: Large or controlling stakes in companies aimed at influencing policies, requiring multi year horizons and patience, occasionally evolving from generals when prices stay low long enough to accumulate significant ownership.
Question 2:
Control situations are nowadays constrained by disclosure rules and institutional resistance. Disclosure rules (13D filings in the U.S.) force investors to reveal stakes above 5%, so stealth accumulation is no longer possible. Once a 13D is filed, arbitrageurs, hedge funds, and even retail traders often front run the investor by buying shares, pushing the price up. (“leakage”) .
Question 3 :
From deep value, cigar butts, he leaned into qualitative analysis, focusing on brand strength, customer loyalty, and long-term franchise value.
Question 4:
Buffett’s decision to return funds stemmed from a variety of factors such as market, structural, and personal. By the late 1960s, the kind of quantitative bargains he had relied on for years had largely disappeared, leaving him with fewer opportunities that matched his investment style. His fund’s size which grew close to about $100 million, further restricted him, since meaningful commitments had to be at least $3 million, effectively shutting him out of the mid & small-cap arena where he had once thrived.
At the same time, the broader market had become increasingly speculative and short-term oriented, a climate that clashed with his preference for patient, long-term investing. On top of these external challenges, Buffett faced personal limits: he admitted that as long as he was “on stage,” managing nearly all of his partners’ net worth and publishing regular performance records, he could not half commit. I have a sneaky feeling that he got into the trap of measuring performance every year and probably stressed himself too much to beat benchmarks ? Why do I say this ? “At the beginning of 1968, I felt prospects for BPL performance looked poorer than at any time in our history… We established a new mark at plus 58.8% versus an overall plus 7.7% for the Dow” sounds like painting into a corner .
Transition into a holding company model which he eventually did . It gave him permanent capital and freed him from the constant pressure of publishing individual partnership performance . It also enabled him to acquire entire businesses, reinvest retained earnings, and compound value within the company without tax friction from distributing gains to partners
Question 5:
My personal favourite is Amex. It’s easier for me to understand than others like Dempster, atleast narrative wise.
Allied cheated Amex with sea-water instead of salad oil and when the news broke out, the share price of American Express fell by more than 50%. Buffett, however, recognized that while the company’s balance sheet had taken a hit, its core franchise, the brand & trust of millions of cardholders and merchants remained intact. He invested nearly 40% of his partnership’s assets into American Express stock, betting that the scandal was temporary and that the brand’s reputation would recover.
The stocks seems to have paid off for more than 5 years when he says “substantially outperformed the general market in 1964, 1965 and 1966 and because of its size (the largest proportion we have ever had in anything – we hit our 40% limit) had a very material impact on our overall results and, even more so, this category. This excellent performance continued throughout 1967 and a large portion of total gain was again accounted for by this single security.”
Question 6:
It had to be dempster . Too much work withunimpressive management that delivered poor earnings, forcing him to intervene directly. Multiple tender offers failed before he finally gained control, and once in charge he had to oversee a hands on turnaround, dealing with bloated inventories, unprofitable branches, and inefficient operations. Even after Harry Bottle’s successful restructuring, Buffett ran into heavy corporate tax burdens and the rapid exhaustion of tax loss carry forwards, which created pressure to restructure or sell. Several advanced sale negotiations collapsed, leaving him scrambling until a last minute asset sale went through. In the end, the investment was profitable, but the process was messy, draining, and dependent on liquidation and financial engineering rather than natural compounding—teaching Buffett why weak businesses, no matter how cheap, often come with unwanted headaches.
Question 7:
During the Buffett Partnership Ltd. (BPL) years, Buffett’s portfolio construction and risk management reflected a blend of Graham-style discipline and his own evolving philosophy. He divided opportunities into categories such as “generals”, “workouts” and “controls”.
Risk management was less about diversification in the conventional sense and more about structured analytical approach with margin of safety. Buffett concentrated capital in his best ideas, sometimes putting 30–40% of assets into a single investment and goes on to say “investment operations involve coupling an extremely high probability that our facts and reasoning are correct with a very low probability that anything could drastically change the underlying value of the investment."”
What I like is the varied range of style. He was a master of managing workload to balance between “generals”, “workouts” and “controls”.
What I didn’t like a bit is the fixation on measurement and comparisons with other funds etc
Question 8:
• Event driven
• Long term
• value focused
• Contrarian opportunist
• Activist investor
For Question 3, what were some examples of that transformation towards quality during the partnership years?
Question 1:
Generals - Stocks that are trading at less the intrinsic value, with no catalyst to bring the stock price in line with intrinsic value.
Workouts - These depend on a know corporate action that will bring a fixed price and so if bought at a low price will offer a know nearly guaranteed return.
Controls - Essentially generals where the partnership owns a large stake in the investment and needs to actively influence the company.
Question 2:
I think it would be more difficult to acquire significant blocks of stock as you now have to notify the market at certain ownership thresholds. Also if you run a fund you have to report all positions quarterly.
Question 3:
At the end of the partnership there was more of a focus on control situations running companies successfully. This is in contrast to the early days where the focus was forcing failing companies to distribute assets, close factories etc.
Question 4:
I think the decision was in the best interest of his partners, a very honest way to operate. Buffett was finding it more and more difficult to find investments that could make the returns above the Dow, a function of availability and the larger dollar amounts he was managing. I also suspect these investments were personally very difficult, they involved conflicts with management, laying off employees etc. His partners also had the option to continue to invest with him without paying fees in the form of there interest in Berkshire, but at the time it’s success and the level of Buffetts involvement would have been far from obvious.
Other options:
1. Continue the partnership, but shift his investment focus to running controlled companies. He preferred to be involved in these enterprises and so would have continued to be engaged. Returns would have likely started to converge with the index, which given the fee structure would have still made money out of the partnership, most managers would see this as an advantage, but not for Buffett.
2. Run the company as before but gradually return capital. This would address the issue of the size of the fund, but wouldn’t address either the availability of investments or Buffetts happiness with the work. There would also be a dilemma of whether Buffett should retain his wealth in the fund or withdraw money - he would be accruing wealth faster than the other partners because of fees. If he retained his wealth in the fund it would dilute other partners, if he didn’t his outside investment may have been of more interest to him.
I think most investment managers would have chosen one of the other options, which is a testament to Buffetts integrity.
Question 5:
I can’t say any of the investments were a particular favorite, but I suspect that’s a function of why they were so profitable. In order to be so statistically undervalued in the first place, they would have to have some combination of being boring, not having an exciting future and some degree of mismanagement - these were not the stock someone would be bragging to there friends and neighbors about!
Question 6:
Sanborn Maps didn’t seem like a pleasant experience, working with an uncooperative board of directors with not real stake in the business.
The most confusing investment was Berkshire Hathaway, I had to keep reminding myself that firstly it wasn’t the business it is today and secondly Buffett was not managing it!
Question 7:
The portfolio was very concentrated, with I suspect about 20 stocks and on occasions large positions of 20%+ in a single stock. The portfolio was selected by selecting the stocks with the highest likely pay off, but a very limited chance of going to zero.
Question 8:
1. Depth of Research (shallow 1 to deep 10) - 8
2. Portfolio Concentration (concentrated 1 to diversified 10) - 2
3. Quantitative (1) vs. Qualitative (10) - 5
4. Business Analyst (1) vs. Security Analyst (10) - 1
5. Time Horizon (short 0 to long 10) - 5
6. Investing Universe: Asset Class - Equities
7. Investing Universe: Market Cap - Any
8. Investing Universe: Geography - US
9. Investing Universe: Sector Focus - None
10. Absolute Return Focus (1) vs. Relative Return Focus (10) - 7 (Focussed on relative returns, but skewed to underperforming (not that this happened!) in upmarket and overperforming in downmarkets)
11. Risk Tolerance (low 1 to high 10) - 3 (This depends how you define risk, Buffett had zero tolerance for permanently losing money, but was happy to see investments fall in value so the could buy more)
12. Bottom-Up (micro 1) vs. Top-Down (macro 10) - 1 (All that matters to Buffett is whether an asset is undervalued)
13. Financial Leverage (no debt 1 to any 10) - 3 (only used in work outs)
14. Growth Rate (any 1 to high 10) - 1
15. Activism (passive 1 vs. active 10) - 8 (His preference was to be passive, but very much would be active if required, I think this is an important aspect in the difference between Generals and Control situations)
16. Focus on Earnings (1) vs. Assets (10) - 7 (It’s difficult to say conclusively but I think the focus was on Assets, given the potential holding period earning must have been a consideration)
17. Technical Analysis (1) vs. Fundamental Analysis (10) - 10
18. Reversion to the Mean (1) vs. Escape from the Mean (10) - 1
19. Management Interaction (none 1 to detailed 10) - 8 (As with Activism )
20. Primary Research (none 1 to in-depth 10) - ? (There was no mention either way of this)
21. Long Only (1) vs. Long/Short (10) - 4 (There was a mention of using short in the Workouts and some other Generals, presumably as a hedge)
Question 9:
The letters consist of a large amount of repeated/similar text from one year to the next, for example the performance comparisons. I thought an LLM would be really useful for reducing this information into two parts, a summary of the repeated information and a breakdown of the yearly changes. I used Gemini and tried various settings and models but ran into various issues… Information being included from web searches rather than the letters, missing key information, inconsistent numbers. It was instructive to be able compare the actual contents of the letters to Gemini’s interpretation.
A solution to this is to force the model to produce code so exact comparisons can be made. My incomplete attempt at this was through these steps with matching prompts:
1. Split the code into in pdf’s for each year - “The following link are the buffet partnership letters. There is one letter for each year. I’d like the document splitting into one pdf for each year. The content is to be like for like.
<link>”
2. There are software tools that can be used to compare documents to see changes from one iteration to the next - “What python tools can I use to compare these pdfs?”
3. Step 2 only compared 1 year to another, I wanted to compare multiple years so I used this - “Are there tools that can compare multiple files”
This is nothing that couldn’t be done 10 years ago with the tools available and the right knowledge, however LLM’s reduce the requisite knowledge and the the time taken to build something like this.
For Q9: try NotebookLM for tasks like these. It has Gemini on the back end but lets you engineer your own context
It's interesting how you framed the whole Graham vs. Fisher debate. That line about them having more in common than what separates them realy hit home. It’s such a smart observation about intrinsic value. Makes you rethink things! Great stuff.
Question 1: What were the three different investment types that Buffett invested in? What do you think about each one?
1) Generals - Private Owner Basis - valuing unloved stocks at their fundamental value, but with an eye to quality too. Waiting until they improved and then selling. Classic Benjamin Graham.
Classic value strategy, with a quality and management twist
2) Generals - Relatively undervalued buying companies trading at a substantial discount to their peers and waiting for them to improve. Pass on those too complex or difficult to understand. Too large to count as Private owner basis but similar to 1) otherwise.
This is not really classic value territory, though it does lie within Graham's investment portfolio concept of strong repeatable earnings. It clearly generated substantial profits.
3) "Workouts": timetabled arbitrage situations where money can be made in relatively small amounts, but over a rapid and predictable timeframe.
I'm surprised he found enough of these; they would certainly be more risky and difficult now, I think.
4) Controls – buying a large part or all of a business and gaining management control to drive the outcome.
Here is one of the best of his strategies, and one he has continued to this day. There are risks, however, and I think he was lucky in some of his early choices of manager to improve the businesses he bought.
Question 2: What of what Buffett described would not be possible or be less effective today? Why?
As he says himself throughout the letters, the attractive low valuations prevailing in 1957 gradually shrank during the partnership years until there was little left in 1969. In May 1967 he says, "Opportunities for investment that are open to the analyst who stresses quantitative factors have virtually disappeared, after rather steadily drying up over the past twenty years." We are in a situation much more like 1969 than 1957.
Question 3: What changes have you observed in Buffett’s approach from the earlier days of when he began managing the partnership as compared to the later partnership years?
The early years were a straight application of Graham's principles. Gradually, however, he became more aware of quality and management and more prepared to buy a business and do real work on it to improve it, something that Graham never did. Finally he went the whole hog and started to buy entire businesses. Towards the end of the letters, he makes an admission that I found to be probably the most revealing thing he says in the letters:
"Interestingly enough, although I consider myself to be primarily in the quantitative school (and as I write this no
one has come back from recess - I may be the only one left in the class), the really sensational ideas I have had
over the years have been heavily weighted toward the qualitative side where I have had a "high-probability
insight". This is what causes the cash register to really sing. However, it is an infrequent occurrence, as insights
usually are, and, of course, no insight is required on the quantitative side - the figures should hit you over the
head with a baseball bat. So the really big money tends to be made by investors who are right on qualitative
decisions but, at least in my opinion, the more sure money tends to be made on the obvious quantitative
decisions."
Quite. And putting this together with his increasing difficulty finding quantitative winners, this is admitting that he had outgrown Benjamin Graham and knew that numbers alone were increasingly not the answer.
Question 4: What do you think of Buffett’s decision to return funds to investors? What would have been other alternatives and the pros/cons of each?
I think it was both logical and inevitable that the structure needed to change; it was complex, and the paperwork and answering to many different investors with very high expectations was, I suspect, getting more and more burdensome. On top of that, I think Buffett had an instinct that things were going to get much more difficult after the bumper year of 1969, and it was a good time to stop and return everyone a very nice cheque. I also suspect that he wanted to lose some of his investors, as he was finding it less and less of an advantage working at scale. Having less capital and more of his own skin in the game would make life easier and give him more manoeuvrability and long-term capital to deploy. It would also allow him to further develop the instincts for good investments outlined in the answer to question 3 and start with a clean slate and more autonomy and develop his philosophy of investing.
He could have founded a new permanent fund and rolled the money into it. But it would have been costly and drawn regulatory scrutiny, and he would still be left with a lot of capital to deploy in a dangerous-looking market, with new investors with no historical uplift to soothe the pain of any initial losses.
Question 5: What was your favorite investment that Buffett made during the partnership days? What made it your favorite?
Dempster Mill was my favourite. It was a classic. He valued it according to textbook Graham. He tried to get the existing management to change it. No discernible result. So he put in a fixer, who turned it round very promptly and produced a 100% or so return in a couple of years. (Note that Graham's textbook valuation was significantly too pessimistic. I am not surprised by this. I think that the haircuts he applies to assets are in some areas unreasonably harsh and simply don't reflect reality much of the time. Lesson: don't blindly apply rules; use reason and judgement.)
Question 6: What was your least favorite investment that Buffett made during the partnership days. What made it your least favorite?
Ironically... Berkshire Hathaway. The fundamental business was textile mills, which he knew were declining and poor assets, more belonging to the past than the future. He knew this for a long time and admits it. He built other businesses inside BH, like insurance, but why he did not restructure it to sell the mills a long time ago I still don't quite understand. From the letters, I think he just liked the people and the dependability of it, but it was sentimental and not a great use of his capital. He said:
"While a Berkshire is hardly going to be as profitable as a Xerox, Fairchild Camera or National Video in a
hypertensed market, it is a very comfort able sort of thing to own. As my West Coast philosopher says, “It is
well to have a diet consisting of oatmeal as well as cream puffs.”
Question 7: How did Buffett approach constructing his portfolio and managing risk? What do you like/not like about his approach?
He is not very candid about this in his letters. He claims that it is all down to good luck, but if it was, he rolled an unreasonably large number of sixes. When you look at what he does rather than what he says, it looks rather different. He has 3 main asset types, and he deploys money between them depending on conditions and the available opportunities:
Generals - market dependent: allocate more when the market is low and rising, reduce when fully valued
Workouts – market independent, good when prices are too high or declining for bread-and-butter reliable income.
Controls – partly market dependent: buy when the market is depressed, gain control and fix, which takes time. Hope to sell in a rising market but gets decent value even in a depressed one.
he is very concentrated, sometimes having up to 40% of capital in a single situation. He aims to have only a few positions, maybe 6 or 7. But because of the different characteristics of the 3 types of situation, the risk is spread, especially market timing risk, which he explicitly and many times in the letters says that he never tries to predict. So it makes sense to have a strategy that constantly mitigates against this market risk.
I admire this approach. The only problem is that it is hard for an ordinary investor to follow it. It is very high risk. Workouts are rare in the modern world, and controls beyond the wallets of most of us, so we are left with much less room to manoeuvre in highly valued markets.
Question 8: Map the Buffett from the partnership letters on as many dimensions of an investment style as you can think of. An example of a dimension: long-term vs. short-term, quantitative vs. qualitative, deep vs. shallow research, etc.
https://datawrapper.dwcdn.net/gZ29U/2/
Question 9: Come up with an AI prompt based on Warren Buffett’s Partnership-days approach.
The most useful prompt I found was:
"distil the Warren Buffett partnership years' letters into some principles that are still useful now"
Gemini 3 gave a great summary – elegant, well laid out and reasonably insightful.
Excellent quote/insight in Question 3
Question 1:
Generals, Workouts, and Control. Each had different methods for the price returning to value. For most of the partnership, Generals were cheap stocks relative to on asset value (private owner basis); company quality and long-range prospects weren’t the basis for value. Later, he expanded the General category to include higher quality business that were undervalued relative to similar companies on an apple-to-apple basis. When selecting Generals, he primarily valued on quantitative means and depended on market changes in price to bring about gains; he had no known reason for this assumption and no timetable. Workouts were also undervalued but those in which he depended on reliably known special situations to bring about change in a specific time window. Controls were undervalued companies in which they took positions that gave them authority to make needed adjustments to bring back (improve business) or realize value (liquidation).
For Generals, the thing that bothered me was not having a reason for a stock to appreciate. There’s a reason the market thinks it’s low and they are either right and something needs to change, or they are wrong and the company IS valuable and will eventually prove it. Workouts and Control require special skills and opportunities not all investors will have. As he himself said, he'd rather not run the company himself but leave other to do it. I agree.
Question 2:
Types of investment opportunities are different. The universe for very cheap yet undervalued stocks is small. Regarding Workouts, I question how many 'meters have time left' that haven't already gotten snatched up.
Question 3:
There are 4 changes I keyed in on. The first is a drift towards putting more weight on the qualitative. Early on he just mentions 'quality' as being important (as Graham did), but later he's more descriptive about what he's looking for, indicating that he's gaining clarity himself. The second thing is that he began to find less securities that met his standard. He was reduced to a 'trickle' of ideas for undervalued, cheap Generals because the market was pricing everything higher and higher. He also ran out of ideas/opportunities for Workouts and Controls. Thirdly, he had to change his performance goal due to the changes in the market that made it near impossible for him to meet while still holding to his investing philosophy. Lastly, he seemed less interested in flipping stocks and more interested in holding them when he believe them to be really great companies. He seemed to take joy in backing high-quality businesses and the people that worked hard to run them.
Question 4:
His willingness to stick to his principles is admirable and I believe he was trying to do what was best for his partners. Hindsight is 20/20. From my understanding, hid pullout before the crash in 1970 and subsequent decade plus it took to recover real value probably saved the investors a massive loss in purchasing power. I wonder his suggestions to move into bonds panned out given the effects of the inflation that followed. I have no educated comment on alternative methods to break up the practice, although I do wonder if there would have been a way for him to let another person take over if the other partners wanted to keep going.
Question 5:
Dempster Mill. They took a business that was failing, milked it, and with the help of the competent president Harry, turned a weak business into a better business. He noted that it was still working out for its eventual new owners when he sold it a few years later. I like this because its more in line with my non-financial concept of investment (enable transformation/create durable value).
Question 6:
Similar to the reasons as above, Sanborn is my least favorite because it was mostly about acquiring their investment portfolio, not improving the business. He discussed the theoretical value of the knowledge base of the map company, but that no one was doing anything innovative with it. I wonder if there could have been something done with it to also turn the business side around.
Question 7:
He took risk reduction very seriously. His portfolio performance affected many family members and that's strong motivation for one to be very risk aware--you don't want all your family hating you because you caused them to lose all their money! His strategy was based on classic Graham-like MOS (substantial excess value compared to the purchase price) and diversification. He also believe diversification by sheer quantity alone is not enough to compensate for potential destructive effects of 1 or 2 substantial inferior quality investment. He aimed to select only the best long-term opportunities and avoid the losers. Due to the limited number of quality ideas, he at times found himself in more 'concentrated' situations than tradition deemed 'conservative'. In this case, he only proceeded once he was able to determine that the odds of a single investment significantly impacting portfolio performance goals were infinitesimally small. His also found that using different types of investment strategies (generals, workouts, control) were beneficial in insulating the portfolio against big swings in the market.
I like how he mixes built diversification on more than just sector and quantity. I also agree with his point on how diversification and risk-avoidance are subjective based on expectations and the degree of variance in performance tolerable to the holder.
QUESTION 8
1. Depth of Research (shallow to deep): 6 -- paid attention to numbers, but hard to tell how much time he spent
2. Portfolio Concentration (concentrated to diversified): 5 -- started quite diversified, ended concentrated. Preferred to be more diversified, but not enough options towards the end
3. Quantitative vs. Qualitative: 3 -- very Graham, but starting to shift
4. Business Analyst vs. Security Analyst: 7 -- very Graham, but starting to shift
5. Time Horizon (short to long): 5 -- flipped when reached desired valuation
6. Investing Universe: Asset Class: Common stock, but on closing partnership, he talked extensively about bonds as options for his partners.
7. Investing Universe: Market Cap: Probably small to mid. They were not well followed or glamorous.
8. Investing Universe: Geography: USA
9. Investing Universe: Sector Focus: I don’t think he was picky about sector.
10. Absolute Return Focus vs. Relative Return Focus: Return relative to DOW (wanted to always do 10% better)
11. Risk Tolerance (low to high): 1
12. Bottom-Up (micro) vs. Top-Down (macro): 1
13. Financial Leverage (no debt to any): 5 -- I don't remember any statements on this.
14. Growth Rate (any to high): 1
15. Activism (passive vs. active): 10
16. Focus on Earnings vs. Assets: 7 -- asset-minded but earning aware.
17. Technical Analysis vs. Fundamental Analysis: 10
18. Reversion to the Mean vs. Escape from the Mean: 1
19. Management Interaction (none to detailed): 10
20. Primary Research (none to in-depth): 10
21. Long Only vs. Long/Short: 5
Question 9
Role: You are Warren Buffet in his partnership days. Use the original letters as your only source for determining his philosophy and methods.
Task: Suggest the type of portfolio one could attempt to build in today's market that would align with his principles in the partnership days. Especially keep in mind his thoughts on Diversification, Conservation, Compounding, and Objective measurements of results.
Second Task: Your goal is to find some examples of securities that would fall into the category of Generals, Workouts or Controls that one could consider if they wanted to build a portfolio as defined above and that meet the criteria according to what Buffet laid out in the Partnership letters.
Interesting that you did not like Sanborn maps. There is obviously no right/wrong answer but that one was one of my favorites since it was a clean activist special situation based on assets - classic Graham with a Buffett twist.
1. Generally Undervalued, Work-outs and Controls. The movement in the share price of generals was largely a product of changing market perception and the growth of the company with partnership involvement non-existent. These could be purchased with a margin of safety given market conditions. Smaller amounts of capital would be needed for this investment, but the time period to realize the return was largely unknown. The value of work-outs may be partially market driven, but the returns largely rests in the actions of management. The time it takes to realize the return was more knowable than in the generals. Buffett was able to exert more influence on the actions of a company in the Controls category. Each category has pros and cons. Liquidity decreases moving from generally undervalued to controlled while the ability to realize returns becomes more knowable and based more on the company itself rather than subject to market influences. Generals were judged using primarily using quantitative measures while qualitative measures were added in evaluating work-outs and controls.
2. I think that the work-outs would be be more difficult in today's market. There would be more competition from private/hedge funds or buy-outs.
3. Buffett included a group named generals- relatively undervalued which served to include the comparison of securities of similar general quality. He also began to include more qualitative measures in his evaluation of potential investments. He acknowledged in 1967 that the big money was made by those who were right on the qualitative side, while the more sure money was made on the quantitative side.
4. I believe that this was a good and selfless decision on his part. Market conditions had been frothy by his evaluation over several years. His clients could determine which was their own best course of action. He also made available the purchase of bonds.
5. My favorite is National Indemnity as it was one of his early insurance company purchases, although most of his purchased performed extremely well.
6. My lease favorite is Sanborn Maps primarily because of problems it had to solve and it's position in an economy that was changing.
7. Buffett uses both quantitative and qualitative tools to value companies he was considering for investment, whether they were generals, work-outs or controls. He then would make a purchase only as long as there was a margin of safety. He has been extremely clear about his approach as as Charlie has said, "I don't know why more people don't follow it". The approach has always made sense to me.
8. Investment dimensions:
long-term
company focused
contrarian - relative to the market
thorough research
primarily quantitative
a focused portfolio
9. Provide a list of 10 publicly traded companies which are trading below their intrinsic value and have earnings growth of over 10% per year.
How selfless was returning money to his partners really? After all, they still needed the money to be managed. It is not like he thought Bill Ruane would do better than him in a challenging market or that he could not exceed muni returns. I suspect the decision was far more about him than what was best for his partners going forward, but of course he has built so much value for them by that point that it is hard to fault him for wanting to lock in his track record and change to a better structure where he would not have to measure himself annually and respond to investor questions unless he wanted to.
He also talked about taking time off and was making trips to California. He knew he was very focused, so may have wanted to attempt having more family time.