[2025–2026] Week 9: Warren Buffett: Partnership Years
Reading assignment and questions for week 9 of the Value Investing Seminar
(Note: If you are just joining the seminar, please start by reading the Introduction)
I wonder how much of the differences between Graham’s and Fisher’s styles was due to their personality vs. the environment that shaped them as investors. Recall that Graham started before the Great Depression and the Crash of 1929, and his cautious approach was heavily influenced by that experience. Fisher, on the other hand, came into his prime after World War 2, amid a recovering economy and a new optimism that emerged in the 1950s.
One important thing to understand is that in a way there is far more that the two investors have in common than what separates them. Both are intrinsic value investors who think about buying a stock as a partial ownership stake in a business. That is very different than the speculators of various stripes who mostly care what someone else will pay regardless of value.
Beyond that, the two investors had major differences. Fisher was all about the qualitative, with management a key factor in his approach. He was looking for exceptional outlier companies that could defy the forces of economic gravity for decades to come.
Graham, on the other hand, was looking for margin of safety in terms of current assets or a past earnings record supported by a resilient business. His posture was to guard against future developments since all he required was reversion to the company’s prior earnings mean to make his return.
The two investors, Graham and Fisher, define the continuum of intelligent long-term investing. Most other successful approaches that I have encountered have elements of both of these two great investors’ processes.
Regarding Question 1 PatrickL wrote: “I see overlap between Fisher and Graham in that both want to understand a business and avoid permanent loss. Where they differ is in what they focus on. Graham leans more on numbers and cheapness. Fisher leans more on long-term growth and the qualities of the business. Graham is fine owning average companies at good prices. Fisher wants exceptional companies even if they don’t look statistically cheap. Both approaches can work depending on what you are trying to do.”
Regarding Question 2 Navin wrote “From Benjamin Graham, I would adopt the principle of a margin of safety and his disciplined, quantitative approach to valuation. His focus on fundamentals like earnings and book value helps avoid speculation and ensures capital preservation.
From Philip Fisher, I would take his qualitative lens—evaluating management, innovation, and competitive advantage—and his long term growth mindset. Holding outstanding companies for decades allows compounding to work, blending Graham’s protection with Fisher’s upside.”
Regarding Question 3 James wrote: “Fisher’s margin of safety is about buying a company that is so good, and so strong that the investor can sleep soundly even if the share price plunges 70% because he *knows* that the underlying company will continue to grow and that Mr. Market will eventually recognize this. He was not a believer in efficient markets.
Grahams margin of safety is quantitative and conservative. Strong measured current sustainable earnings power or very low price compared to NAV - preferably net net - getting the company ‘for free’”
Regarding Question 4 Helen wrote: “Fisher adds management quality and their ability to adapt to a changing economic environment in a reasonable manner, both financially and in the managerial processes of running a successful company. I think this is fundamental to the selection of investments.”
Regarding Question 5 PatrickL wrote: “I like Fisher’s checklist. It forces you to think about things that don’t show up in the financials, like management honesty, competitive position, culture, and the company’s ability to keep improving. If I added anything, it would be something on capital allocation since that matters a lot today. I don’t think I would remove anything”
Week 9 assignment is to read Buffett’s Partnership Letters (not to be confused with the Berkshire Hathaway letters, those are next). If you search for “Buffett Partnership Letters” in your favorite search engine, you should be able to find them, let me know if you have any issues. Please answer the following questions:
Question 1: What were the three different investment types that Buffett invested in? What do you think about each one?
Question 2: What of what Buffett described would be not possible or be less effective today? Why?
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?
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?
Question 5: What was your favorite investment that Buffett made during the partnership days? What made it your favorite?
Question 6: What was your least favorite investment that Buffett made during the partnership days. What made it your least favorite?
Question 7: How did Buffett approach constructing his portfolio and managing risk? What do you like/not like about his approach?
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.
Question 9: Come up with an AI prompt based on Warren Buffett’s Partnership-days approach.
Note: Our next reading will be Warren Buffett’s Berkshire Hathaway Annual Letters. The following week’s reading will be John Train’s The New Money Masters. The latter can take some time to obtain so I suggest ordering early.
Now it’s your turn:
Submit your answers in the comments below this article with all your answers in a single comment. I will engage with some of the answers each week and highlight some of the ones I find most insightful in next week’s seminar assignment article.
Engage with the answers of some of your fellow seminar members in the comments below. Remember – the goal is to learn together. Be kind, be respectful and try to add to our learning as a community.
Feel free to ask any questions about the reading in your comment.
Until next week,
Gary
About the author
Gary Mishuris, CFA is the Managing Partner and Chief Investment Officer of Silver Ring Value Partners, an investment firm that seeks to apply its intrinsic value approach to safely compound capital over the long-term. He also teaches the Value Investing Seminar at the F.W. Olin Graduate School of Business.
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
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.