Although this book was written by a family member of Warren Buffet’s (his former daughter-in-law Mary Buffett) it is not necessarily true to his investing style and actually attacks his greatest influencer, Benjamin Graham. Any value investor would be discouraged by this and make the book difficult to read.
Besides that this book is easy to read and provides some nice case studies at the end of the book. My suggestion though would be not to buy this one as most of the information is repeated and available elsewhere online for free.
Check out the reviews on Amazon for more information: The Warren Buffett Stock Portfolio: Warren Buffett Stock Picks
What is Buffett’s Investing Strategy?
Mary Buffett writes that Buffett’s style is to selectively buy while others are dumping and cashing in. While everyone else is buying as prices rise, Buffett sits idle. His goal is to have cash while others don’t. True to history, many times Buffett has been buying significant shares in companies while others are worried about the markets.
Although others are often confused by this style, Buffett prospers. The author admits that this is often counter-intuitive for many, not just new investors. That is why it is important to learn market trends and maintain a long term strategy.
Warren Buffett started this strategy thanks in great part to the influence of Benjamin Graham. Buffett started out in the 1950’s and 1960’s buying pink sheets and over-the-counter securities. Again, this might seem counter-intuitive because these types of securities are often looked down upon today because of the lack of security and regulation compared to stocks trading under the major exchanges.
In 1973-74 when everyone was buying in a bull market frenzy, Buffett cashed out everything. The idea was that as soon as everyone turned around to sell everything in the next bear market, Buffett would be ready to buy everything back at a discount.
The Author Disrespects and Discredits Benjamin Graham
The biggest problem I had with this book that really made it difficult at times to read was the authors distaste for Benjamin Graham. Not only does she openly oppose strategies for fundamental analysis and finding value, but she also gives her ex-father-in-law, Warren Buffett credit for his achievements and theories. She follows this up by discrediting almost any influence Graham might have had on her brother.
For a history student this is very discouraging. Of course, investors know that Buffett did eventually augment Graham’s strategy and bring a new relevance to his generation of investors. However to discredit Graham’s analysis that Buffett used often is not fair.
Specifically, Mary claims that Graham did not value growth like Buffett did. She claims that Buffett started a trend of using Graham’s fundamental analysis, adding forecasts for growth and buying small caps with a competitive advantage for the future. However, reading Security Analysis you will find that there is a whole section devoted to valuing future growth. This was in the 1960’s, before Buffett is credit with this “revolutionary idea.”
Repetitive and Cookie Cutter Style Approach to Analyzing a Company
One could argue that a cookie cutter approach to evaluating a company that Buffett would consider buying is a valuable tool. Keeping things consistent would be ideal. However, it does not make for very enjoyable reading nor does it bring anything relevant to the discussion if it is repeated over and over again.
Case Studies – Companies Warren Buffett Likes
- American Express Company
- BNY Mellon
- Coca Cola
- Conoco Philips
- Johnson & Johnson
- Proctor & Gamble
- Sanofi S.A.
- Union Pacific Railroad
- US Bancorp
- Washington Post
- Wells Fargo Bank
- Mung, Combs Weschler
This section comprises the majority of the book. It is also rather hard to read because it feels like a template was made and then all of the data was filled in later. The author shows absolutely no passion in these companies when she clearly says at the preface that potential investments (Buffett Buys) must have some competitive advantage or catalyst beyond just simple fundamentals. The problem is, that is not evident in the writing of each profile and actually quite weak.
The author simply regurgitates P/E ratios, dividend growth, earnings-per-share and that’s about it. Again, all of this information is available online for free and updated daily. There’s no need to have a book and waste the money on it.