- Willingness to pay for endurance and quality instead of buying cheap mediocre companies.
- Increased holding period length instead of flipping stock or squeezing out the last minutes on the parking meter.
- Many more whole-business acquisitions due to availability of permanent capital
- Increased belief that $1 in one company is not the same as $1 in another company. Value is not just 'numbers'.
Similarities: Intrinsic value emphasis, MOS based on purchase price, disciplined and patient temperament, business ownership mindset
Q2:
Differences:
- Yardstick of measurement changes from intrinsic value proxy of book value/ROE to market price.
- Gained clarity about the role of growth potential in valuation calculations
- Even more willing to pay for quality. Price criteria changed from 'very attractive' to 'attractive'.
- Slightly more accepting of exposure to tech
- Purchase opportunities limited by size.
Q3:
- National Indemnity: Essential part of float creation which was the basis for funding his future investments. It was genius way to get 'free money' to invest in. I believe he said something about insurance business being his sphere of competence and a business he understood; if so, his money was where his mouth was as far as what to invest in.
- BNSF: Granted this is capital intensive, likely to continue to be a challenge going forward, and not a big returner. That said, I agree that it is a vital part of infrastructure and I like his attitude towards pouring into to it to ensure it is safe, stable and productive.
Q4:
- Dexter Shoe: Banked on the longevity of producing a single product that could be produced by cheaper labor offshore. I still wonder if this was lack of attention to changing global landscape and its effects.
- General Reinsurance: Although it resolved, this was a time eater, complicated and messy. Not sure he would have bought it if he had been more aware of the complicated derivatives.
Q5:
There are too many points to write here, but I have a few big picture thoughts.
Goal: Grow purchasing power at reasonable rate while minimizing losses. I'm not a business, but I do have a net worth and like a business, I want to maximize my net worth in the long run. Invest in companies "whose aggregate earnings march upward over the years" and my value will grow. Immediate returns may not happen right away; there will be bad years and good years.
Focus: Business analyst focus (industry stability, return on capital, sustainable low-cost operator, responsible use of debt, shareholder focused management, etc.). Theses fundamentals make sense to me, and I enjoy learning about business realities.
Risk Management: I appreciate his honesty about his mistakes when he made a bad move and am encouraged that making mistakes is part of the deal. That is why MOS is so important. MOS is not just protection against unknowable but also to take care of MY mistakes! In addition to the Graham style MOS elements, I would add Buffet's thoughts on sticking to understandable companies in my sphere of competence and limit portfolio percentage of risky turnarounds/new ventures.
Q6:
Seems like with both Berkshire and Dexter, a bit more macro awareness could have been useful. I'd look to integrate the big picture.
I don't expect to hold forever when a company has proven it cannot produce. If I can make better return at just as good of a company, I would probably switch. While I understand the obligation he felt to continue to hold to 'mistake' companies that they bought, I think selling them might have been better in the long run.
I'm also not interested in arbitrage situations, owning businesses or participating in decision making. I don't have skills, experience or resources for this style of investment.
Q7:
He might be able to take advantage of smaller ideas. He would have less ownership opportunities in companies (I'm assuming less money would be cost prohibitive on purchasing companies).
Q8:
1. Depth of Research (shallow to deep): 5 -- paid attention to numbers, but hard to tell how much time he spent
2. Portfolio Concentration (concentrated to diversified): 10 -- Beginning days of Berkshire he's fairly concentrated, but by 2025 there are a massive number of subsidiaries in diverse sectors.
3. Quantitative vs. Qualitative: 8 -- He's not as qualitative as Fisher (who almost feels 'carelessly' qualitative), but he's way more qualitative than Graham.
4. Business Analyst vs. Security Analyst: 1 -- shifts pretty quickly once Munger comes along
5. Time Horizon (short to long): 10
6. Investing Universe: Asset Class -- Used a variety of instruments, especially as they grew and needed a place to put their funds.
7. Investing Universe: Market Cap: Large -- due to size and need to purchase larger portion.
8. Investing Universe: Geography: USA, but started expanding in later years.
9. Investing Universe: Sector Focus: Any
10. Absolute Return Focus vs. Relative Return Focus: 10 (relative to S&P 500…Just wanted to beat it, but it didn't have to be by much)
11. Risk Tolerance (low to high): 3
12. Bottom-Up (micro) vs. Top-Down (macro): 1
13. Financial Leverage (no debt to any): 5 -- wise debt is fine, but less debt is preferred.
14. Growth Rate (any to high): 1
15. Activism (passive vs. active): 10
16. Focus on Earnings vs. Assets: 2
17. Technical Analysis vs. Fundamental Analysis: 10
18. Reversion to the Mean vs. Escape from the Mean: 5
19. Management Interaction (none to detailed): 10
20. Primary Research (none to in-depth): 10
21. Long Only vs. Long/Short: 2 -- less inclined to sell
Q9:
Using Buffet's advice to investors from the Berkshire shareholder letters, analyze this TIKR. What would his perspective be on the quality of this company? Would it be speculative to him? How would he evaluate the management? Would he find them pleasing to work with? What would his perspective be on the usage of the capital? Note any red flags.
1. Buffett's partnership investments were primarily grounded in Graham's principles of "cigar butt" or mis-priced securities. He also included some degree of assessment of the quality of management. Charlie's influence was introduced in the Berkshire years to include good companies at reasonable prices.
2. Warren still looked for mis-priced securities; those that were undervalued on an increased variety of metrics. He was disciplined to wait until he found candidates for investment that fit his criteria. HIs inclusion of insurance companies added larger volumes of float that allowed him to consider larger companies for purchase.
3. See's and Coca-Cola. It is easy to understand how these companies can compound. I make regular annual contributions to See's profit margins.
4. Dexter Shoes. It was purchased with shares of store, which he rarely did. Then the company fell apart.
5. Most all of them. The one area that I have questioned is holding periods to allow compounding to happen given the inclusion of tech into many companies. My number one is holding cash until an appropriate opportunity presents itself.
6. I wouldn't be able to be a private buyer of large companies.
7. I think he would focus on smaller cap and international companies.
8. Long-term - 9
Deep research - 9
Compounders - 9
Buying good companies - 9
Quality management - 10
Large companies - 10
9. Look for companies with large economic moats. sustainable competitive advantages, solid financials, quality management, low debt, small caps and international equities.
Partnership capital was small, allowing opportunistic purchases and arbitrage; Berkshire’s vast capital required larger, fewer deals and pushed Buffett toward whole company acquisitions and large equity stakes. With insurance holding, a low cost float that Buffett used to fund acquisitions is a structural advantage absent during the Partnership era. At Berkshire Buffett increasingly bought businesses for their managers and culture which wasn’t much discussed in partnership days. Did he just remove the benchmarks (and comparing with other funds) comparisions in Berkshire letters ;-)
Question 2:
Similarities : Buffett always sought a margin of safety and mispriced opportunities; the underlying discipline of buying below intrinsic value persisted even as the type of business he bought changed. Concentration and long term mindset etc.
Differences : In the later days, he favored durable competitive advantages and predictable cash flows , probably a shift strongly influenced by Charlie Munger’s emphasis on quality over bargain price
In the 1980 shareholder letter Buffett explained that when he found attractive opportunities he would borrow at high rates (around 12%) to increase purchasing power accepting the interest cost because the expected return on the investments justified it.
Question 3:
My top Buffett picks here are Blue Chip Stamps (and its subsidiaries Wesco and See’s), GEICO, and Coca Cola
My #1 would be Blue Chip Stamps. Blue Chip’s holdings included Wesco and interests that led to owning See’s Candies, a business Buffett later praised for its pricing power and durable economics. The Wesco/Blue Chip experience helped formalize Buffett’s partnership with Charlie Munger. I also found it interesting that he kept adding for 6 years and decided to merge with Berkshire
Question 4:
Buffett has repeatedly called this his worst deal: he paid $443 million in Berkshire stock for a shoe maker that soon lost competitiveness to imports. Tesco had accounting scandals and difficult to judge overseas entities. The recent TSMC purchase and sale was also a bit un-Buffett like.
Question 5:
Almost all of them, I would adopt Buffett’s discipline of buying within my circle of competence, insisting on a margin of safety, prioritizing quality businesses with predictable cash flows & moats, and treating capital allocation as the core skill . Ideally these would result in long term compounding and are practical for investors of any size
Question 6:
1. I would concentrate less.
2. I wouldn’t hold that much cash
3. I wouldn’t buy whole companies (as of now )
4. I wouldn’t use leverage (via float etc) as of now
Question 7:
Probably some more workouts like mergers, spin offs, restructurings, bankruptcies, corporate action opportunities etc. He seems to enjoy those.
Major portion would still be businesses with predictable cash flows, high ROIC, strong moats, and trustworthy managers, holdable for decades to harness compounding and tax efficiency.
Question 1: What were the differences and similarities between Buffett’s investing during the Partnership days as compared with the Berkshire Hathaway days?
The similarities were that the approach of a margin of safety, and not paying too much. Looking out for value and special opportunities with convertible shares, and underpriced bonds continued to feature in the new vehicle.
The differences were in the long term approach for shareholdings, buying things "forever" and assessing their potential on that basis. The increasing preference for buying whole businesses, both for tax efficiency, and management control. The expansion of insurance as a way of gathering funds for further investment at a very low cost of capital. This is by its nature a very long term game, but the cashflow profile is the best in any industry anywhere.
Purchases are seen for their "lookthrough value" meaning the share of underlying earnings being bought by an investment, regardless of whether it was being paid out as a dividend, used for stock purchases or held for further internal investment. He concentrated on growing this value at at least 15%, with the view that the stock market would eventually reward him by valuing these earnings on a decent multiple, and not caring very much as a low stock price enabled him to buy more earnings power for a lower cost. His line is that only "Disinvestors" benefit from high prices, as they are the ones who want to sell. Everyone else should be happy. In the partnership years he would be selling when the price reached his target to reward his Partners.
Question 2: What were the differences and similarities between Buffett’s investing during the early days at Berkshire Hathaway vs. the later years?
The biggest theme is his increasing difficulty in investing ever larger amounts of funds. This made him pivot towards larger and more liquid positions, and forced him to hold cash for long periods while he looked.
The management of his companies shifted. He became less sentimental about the underperforming businesses, as he learned how expensive it could be to procrastinate, and came to realise that no company however good lasts forever if the business landscape shifts. It took him at least 5 years between 1980 and 1985 to stop throwing money at the two remaining mills in Berkshire Hathaway, and his liquidation proceeds were puny. When his shoe business went wrong in 1999 he acted in the year with "significant severance and relocation costs" meaning he made a lot of American shoemakers redundant and sourced abroad like everyone else had already done in the USA (93% according to him in the letter)
Question 3: What were your favorite investments that Buffett made? Why?
Despite my comments below he was remarkably good at finding exceptional businesses with exceptional management and retaining both for decades of strong performance.
GEICO: Happily it was his very first investment as a sign of things to come. It was a remarkable investment because it both generated massive funds as float, and was so competitive that it also generated a very good profit as well. This kind of double return was one of his most effective ploys, and is very hard to find in the world. Only one other comes to mind: It was one of the reasons that being a Name at Lloyds of London was so lucrative for so long, your investments earned money as investments, and collected underwriting profits from their collateral role as well. Many of the names collected their two checks for one set of capital every year between the mid 1960's and the mid 1980's without ever being called on to payout on a claim during the whole 20 years. Alas the late 80's saw huge claims, followed by the collapse of the system. It failed to work very well when the money was actually needed, and the Corporation itself had to rescue the worse hit syndicates and names.
Question 4: What were your least favorite investments that Buffett made? Why?
There are some businesses that are notoriously difficult by the nature of what they do, rather than what they are. Buffett wrote about this himself with the famous quote "When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact" So he should have known better than to buy an airline - a business with notoriously terrible economics.
Other business sectors have a reputation for opacity and poor long term performance and none more than reinsurance business. Buying Gen Re in 2000 was a reckless move. It bought him masses of float, but he was already finding it difficult to find a good home for the cash he had, and by 2004 he had substantial cash balances above the value of the whole float. On top of that it cost him at least 3.2bn in claims, a poor management that had to be completely overhauled, and wiped out a whole year of earnings. He also had to unwind the horrible derivatives business, which cost him another 0.5 billion or so, while hating every minute of the several years it took. On the plus side, he needed the staff and infrastructure to keep growing the insurance side and managing its increasing size, but it was a steep price to pay. I honestly think he should have known better on this one.
Question 5: What aspects of Buffett’s approach would you like to incorporate into your process? Why?
look through earnings is a good way of focusing on the value you are buying and making you think about the business in a long term way, and the earnings power you are buying. I'm going to try and make that part of my process.
Question 6: What aspects of Buffett’s approach would you rather not incorporate into your process? Why?
He was not prepared to admit that all businesses have a lifespan, he always talked about owning businesses "forever". But this is to ignore the truth that all things change all the time and you have to have a plan for the endgame. When do you sell? Or do you wait until the bitter end and close down? The latter is expensive and always sad. The former is better in my opinion. The new owners may have to do difficult things, but there is room in the world for new eyes, and new ideas about an old business.
Question 7: How would Buffett invest today if he were managing $100M?
He would do all the same things, but with the advantage of a much wider universe to look in, and not have the world breathing down his neck to see what he was going to buy next. You can buy small private businesses with great cashflow characteristics for 4 - 6 times earnings, and with a little work make 20 - 30 % annual gains without much risk if you have the right attitude and experience.
Question 8: Please put Buffett on as many dimensions of investment style as possible, and talk about how, if at all, he has changed his positioning on that dimension from the early partnership days to now. Use 1-10.
Question 9: Come up with an AI prompt based on Warren Buffett’s investing approach.
as a professional analyst use the investment principles of Warren Buffett to select a list of 10 companies that meet his criteria for a good value purchase. Refer to his Berkshire Hathaway annual letters as guidance and refer to them in your reasoning.
Q1:
Differences:
- Willingness to pay for endurance and quality instead of buying cheap mediocre companies.
- Increased holding period length instead of flipping stock or squeezing out the last minutes on the parking meter.
- Many more whole-business acquisitions due to availability of permanent capital
- Increased belief that $1 in one company is not the same as $1 in another company. Value is not just 'numbers'.
Similarities: Intrinsic value emphasis, MOS based on purchase price, disciplined and patient temperament, business ownership mindset
Q2:
Differences:
- Yardstick of measurement changes from intrinsic value proxy of book value/ROE to market price.
- Gained clarity about the role of growth potential in valuation calculations
- Even more willing to pay for quality. Price criteria changed from 'very attractive' to 'attractive'.
- Slightly more accepting of exposure to tech
- Purchase opportunities limited by size.
Q3:
- National Indemnity: Essential part of float creation which was the basis for funding his future investments. It was genius way to get 'free money' to invest in. I believe he said something about insurance business being his sphere of competence and a business he understood; if so, his money was where his mouth was as far as what to invest in.
- BNSF: Granted this is capital intensive, likely to continue to be a challenge going forward, and not a big returner. That said, I agree that it is a vital part of infrastructure and I like his attitude towards pouring into to it to ensure it is safe, stable and productive.
Q4:
- Dexter Shoe: Banked on the longevity of producing a single product that could be produced by cheaper labor offshore. I still wonder if this was lack of attention to changing global landscape and its effects.
- General Reinsurance: Although it resolved, this was a time eater, complicated and messy. Not sure he would have bought it if he had been more aware of the complicated derivatives.
Q5:
There are too many points to write here, but I have a few big picture thoughts.
Goal: Grow purchasing power at reasonable rate while minimizing losses. I'm not a business, but I do have a net worth and like a business, I want to maximize my net worth in the long run. Invest in companies "whose aggregate earnings march upward over the years" and my value will grow. Immediate returns may not happen right away; there will be bad years and good years.
Focus: Business analyst focus (industry stability, return on capital, sustainable low-cost operator, responsible use of debt, shareholder focused management, etc.). Theses fundamentals make sense to me, and I enjoy learning about business realities.
Risk Management: I appreciate his honesty about his mistakes when he made a bad move and am encouraged that making mistakes is part of the deal. That is why MOS is so important. MOS is not just protection against unknowable but also to take care of MY mistakes! In addition to the Graham style MOS elements, I would add Buffet's thoughts on sticking to understandable companies in my sphere of competence and limit portfolio percentage of risky turnarounds/new ventures.
Q6:
Seems like with both Berkshire and Dexter, a bit more macro awareness could have been useful. I'd look to integrate the big picture.
I don't expect to hold forever when a company has proven it cannot produce. If I can make better return at just as good of a company, I would probably switch. While I understand the obligation he felt to continue to hold to 'mistake' companies that they bought, I think selling them might have been better in the long run.
I'm also not interested in arbitrage situations, owning businesses or participating in decision making. I don't have skills, experience or resources for this style of investment.
Q7:
He might be able to take advantage of smaller ideas. He would have less ownership opportunities in companies (I'm assuming less money would be cost prohibitive on purchasing companies).
Q8:
1. Depth of Research (shallow to deep): 5 -- paid attention to numbers, but hard to tell how much time he spent
2. Portfolio Concentration (concentrated to diversified): 10 -- Beginning days of Berkshire he's fairly concentrated, but by 2025 there are a massive number of subsidiaries in diverse sectors.
3. Quantitative vs. Qualitative: 8 -- He's not as qualitative as Fisher (who almost feels 'carelessly' qualitative), but he's way more qualitative than Graham.
4. Business Analyst vs. Security Analyst: 1 -- shifts pretty quickly once Munger comes along
5. Time Horizon (short to long): 10
6. Investing Universe: Asset Class -- Used a variety of instruments, especially as they grew and needed a place to put their funds.
7. Investing Universe: Market Cap: Large -- due to size and need to purchase larger portion.
8. Investing Universe: Geography: USA, but started expanding in later years.
9. Investing Universe: Sector Focus: Any
10. Absolute Return Focus vs. Relative Return Focus: 10 (relative to S&P 500…Just wanted to beat it, but it didn't have to be by much)
11. Risk Tolerance (low to high): 3
12. Bottom-Up (micro) vs. Top-Down (macro): 1
13. Financial Leverage (no debt to any): 5 -- wise debt is fine, but less debt is preferred.
14. Growth Rate (any to high): 1
15. Activism (passive vs. active): 10
16. Focus on Earnings vs. Assets: 2
17. Technical Analysis vs. Fundamental Analysis: 10
18. Reversion to the Mean vs. Escape from the Mean: 5
19. Management Interaction (none to detailed): 10
20. Primary Research (none to in-depth): 10
21. Long Only vs. Long/Short: 2 -- less inclined to sell
Q9:
Using Buffet's advice to investors from the Berkshire shareholder letters, analyze this TIKR. What would his perspective be on the quality of this company? Would it be speculative to him? How would he evaluate the management? Would he find them pleasing to work with? What would his perspective be on the usage of the capital? Note any red flags.
1. Buffett's partnership investments were primarily grounded in Graham's principles of "cigar butt" or mis-priced securities. He also included some degree of assessment of the quality of management. Charlie's influence was introduced in the Berkshire years to include good companies at reasonable prices.
2. Warren still looked for mis-priced securities; those that were undervalued on an increased variety of metrics. He was disciplined to wait until he found candidates for investment that fit his criteria. HIs inclusion of insurance companies added larger volumes of float that allowed him to consider larger companies for purchase.
3. See's and Coca-Cola. It is easy to understand how these companies can compound. I make regular annual contributions to See's profit margins.
4. Dexter Shoes. It was purchased with shares of store, which he rarely did. Then the company fell apart.
5. Most all of them. The one area that I have questioned is holding periods to allow compounding to happen given the inclusion of tech into many companies. My number one is holding cash until an appropriate opportunity presents itself.
6. I wouldn't be able to be a private buyer of large companies.
7. I think he would focus on smaller cap and international companies.
8. Long-term - 9
Deep research - 9
Compounders - 9
Buying good companies - 9
Quality management - 10
Large companies - 10
9. Look for companies with large economic moats. sustainable competitive advantages, solid financials, quality management, low debt, small caps and international equities.
Question 1:
Partnership capital was small, allowing opportunistic purchases and arbitrage; Berkshire’s vast capital required larger, fewer deals and pushed Buffett toward whole company acquisitions and large equity stakes. With insurance holding, a low cost float that Buffett used to fund acquisitions is a structural advantage absent during the Partnership era. At Berkshire Buffett increasingly bought businesses for their managers and culture which wasn’t much discussed in partnership days. Did he just remove the benchmarks (and comparing with other funds) comparisions in Berkshire letters ;-)
Question 2:
Similarities : Buffett always sought a margin of safety and mispriced opportunities; the underlying discipline of buying below intrinsic value persisted even as the type of business he bought changed. Concentration and long term mindset etc.
Differences : In the later days, he favored durable competitive advantages and predictable cash flows , probably a shift strongly influenced by Charlie Munger’s emphasis on quality over bargain price
In the 1980 shareholder letter Buffett explained that when he found attractive opportunities he would borrow at high rates (around 12%) to increase purchasing power accepting the interest cost because the expected return on the investments justified it.
Question 3:
My top Buffett picks here are Blue Chip Stamps (and its subsidiaries Wesco and See’s), GEICO, and Coca Cola
My #1 would be Blue Chip Stamps. Blue Chip’s holdings included Wesco and interests that led to owning See’s Candies, a business Buffett later praised for its pricing power and durable economics. The Wesco/Blue Chip experience helped formalize Buffett’s partnership with Charlie Munger. I also found it interesting that he kept adding for 6 years and decided to merge with Berkshire
Question 4:
Buffett has repeatedly called this his worst deal: he paid $443 million in Berkshire stock for a shoe maker that soon lost competitiveness to imports. Tesco had accounting scandals and difficult to judge overseas entities. The recent TSMC purchase and sale was also a bit un-Buffett like.
Question 5:
Almost all of them, I would adopt Buffett’s discipline of buying within my circle of competence, insisting on a margin of safety, prioritizing quality businesses with predictable cash flows & moats, and treating capital allocation as the core skill . Ideally these would result in long term compounding and are practical for investors of any size
Question 6:
1. I would concentrate less.
2. I wouldn’t hold that much cash
3. I wouldn’t buy whole companies (as of now )
4. I wouldn’t use leverage (via float etc) as of now
Question 7:
Probably some more workouts like mergers, spin offs, restructurings, bankruptcies, corporate action opportunities etc. He seems to enjoy those.
Major portion would still be businesses with predictable cash flows, high ROIC, strong moats, and trustworthy managers, holdable for decades to harness compounding and tax efficiency.
Question 8:
1. Value orientation Partnership: 10 Today: 9
2. Quality bias (economic moats) Partnership: 5 Today: 10
3. Cigar butt buying Partnership: 10 Today: 2
4. Concentration Partnership: 8 Today: 10
5. Event/workout investing Partnership: 8 Today: 4
Question 1: What were the differences and similarities between Buffett’s investing during the Partnership days as compared with the Berkshire Hathaway days?
The similarities were that the approach of a margin of safety, and not paying too much. Looking out for value and special opportunities with convertible shares, and underpriced bonds continued to feature in the new vehicle.
The differences were in the long term approach for shareholdings, buying things "forever" and assessing their potential on that basis. The increasing preference for buying whole businesses, both for tax efficiency, and management control. The expansion of insurance as a way of gathering funds for further investment at a very low cost of capital. This is by its nature a very long term game, but the cashflow profile is the best in any industry anywhere.
Purchases are seen for their "lookthrough value" meaning the share of underlying earnings being bought by an investment, regardless of whether it was being paid out as a dividend, used for stock purchases or held for further internal investment. He concentrated on growing this value at at least 15%, with the view that the stock market would eventually reward him by valuing these earnings on a decent multiple, and not caring very much as a low stock price enabled him to buy more earnings power for a lower cost. His line is that only "Disinvestors" benefit from high prices, as they are the ones who want to sell. Everyone else should be happy. In the partnership years he would be selling when the price reached his target to reward his Partners.
Question 2: What were the differences and similarities between Buffett’s investing during the early days at Berkshire Hathaway vs. the later years?
The biggest theme is his increasing difficulty in investing ever larger amounts of funds. This made him pivot towards larger and more liquid positions, and forced him to hold cash for long periods while he looked.
The management of his companies shifted. He became less sentimental about the underperforming businesses, as he learned how expensive it could be to procrastinate, and came to realise that no company however good lasts forever if the business landscape shifts. It took him at least 5 years between 1980 and 1985 to stop throwing money at the two remaining mills in Berkshire Hathaway, and his liquidation proceeds were puny. When his shoe business went wrong in 1999 he acted in the year with "significant severance and relocation costs" meaning he made a lot of American shoemakers redundant and sourced abroad like everyone else had already done in the USA (93% according to him in the letter)
Question 3: What were your favorite investments that Buffett made? Why?
Despite my comments below he was remarkably good at finding exceptional businesses with exceptional management and retaining both for decades of strong performance.
GEICO: Happily it was his very first investment as a sign of things to come. It was a remarkable investment because it both generated massive funds as float, and was so competitive that it also generated a very good profit as well. This kind of double return was one of his most effective ploys, and is very hard to find in the world. Only one other comes to mind: It was one of the reasons that being a Name at Lloyds of London was so lucrative for so long, your investments earned money as investments, and collected underwriting profits from their collateral role as well. Many of the names collected their two checks for one set of capital every year between the mid 1960's and the mid 1980's without ever being called on to payout on a claim during the whole 20 years. Alas the late 80's saw huge claims, followed by the collapse of the system. It failed to work very well when the money was actually needed, and the Corporation itself had to rescue the worse hit syndicates and names.
Question 4: What were your least favorite investments that Buffett made? Why?
There are some businesses that are notoriously difficult by the nature of what they do, rather than what they are. Buffett wrote about this himself with the famous quote "When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact" So he should have known better than to buy an airline - a business with notoriously terrible economics.
Other business sectors have a reputation for opacity and poor long term performance and none more than reinsurance business. Buying Gen Re in 2000 was a reckless move. It bought him masses of float, but he was already finding it difficult to find a good home for the cash he had, and by 2004 he had substantial cash balances above the value of the whole float. On top of that it cost him at least 3.2bn in claims, a poor management that had to be completely overhauled, and wiped out a whole year of earnings. He also had to unwind the horrible derivatives business, which cost him another 0.5 billion or so, while hating every minute of the several years it took. On the plus side, he needed the staff and infrastructure to keep growing the insurance side and managing its increasing size, but it was a steep price to pay. I honestly think he should have known better on this one.
Question 5: What aspects of Buffett’s approach would you like to incorporate into your process? Why?
look through earnings is a good way of focusing on the value you are buying and making you think about the business in a long term way, and the earnings power you are buying. I'm going to try and make that part of my process.
Question 6: What aspects of Buffett’s approach would you rather not incorporate into your process? Why?
He was not prepared to admit that all businesses have a lifespan, he always talked about owning businesses "forever". But this is to ignore the truth that all things change all the time and you have to have a plan for the endgame. When do you sell? Or do you wait until the bitter end and close down? The latter is expensive and always sad. The former is better in my opinion. The new owners may have to do difficult things, but there is room in the world for new eyes, and new ideas about an old business.
Question 7: How would Buffett invest today if he were managing $100M?
He would do all the same things, but with the advantage of a much wider universe to look in, and not have the world breathing down his neck to see what he was going to buy next. You can buy small private businesses with great cashflow characteristics for 4 - 6 times earnings, and with a little work make 20 - 30 % annual gains without much risk if you have the right attitude and experience.
Question 8: Please put Buffett on as many dimensions of investment style as possible, and talk about how, if at all, he has changed his positioning on that dimension from the early partnership days to now. Use 1-10.
https://datawrapper.dwcdn.net/TMHCQ/2/
Question 9: Come up with an AI prompt based on Warren Buffett’s investing approach.
as a professional analyst use the investment principles of Warren Buffett to select a list of 10 companies that meet his criteria for a good value purchase. Refer to his Berkshire Hathaway annual letters as guidance and refer to them in your reasoning.