More Praise for - Higher Intellect

1 more Praise forThe warren buffett Way, First Edition The warren buffett Wayoutlines his career and presents examples of howhis investment techniques and methods evolved and the important individu-als in the process. It also details the key investment decisions that producedhis unmatched record of performance. Finally, the book contains the think-ing and the philosophy of an investor that consistently made money usingthe tools available to every citizen no matter what their level of wealth. Peter S. Lynchbestselling author, One Up On Wall Streetand Beating the Street Robert Hagstrom presents an in-depth examination of warren buffett sstrategies, and the how and why behind his selection of each of the major se-curities that have contributed to his remarkable record of success.

2 His home-spun wisdom and philosophy are also part of this comprehensive, interesting,and readable book. John C. BogleChairman, The Vanguard Group warren buffett is surely the Greatest Investor of this century not so muchbecause he built a great fortune with a free market as because he shared hisimportant thinking with us and has openly demonstrated the sagacity andcourage so vital to success. Berkshire Hathaway has been my largest, longestinvestment. warren has been my best teacher. Charles D. EllisManaging Partner, Greenwich Associates warren buffett is often characterized simply as a value investor or a BenGraham disciple.

3 Hagstrom f ills in the rest of the story with some im-mensely practical pointers on prospering in the market. Martin S. FridsonManaging Director, Merrill Lynch In simple language, this book tells the rules by which the most successfulAmerican stock investor of modern time got that way. It could be a godsendto the legion of unhappy investors who keep f loundering because they ignorethe basics of major investment success. Phil Fisherauthor, Common Stocks and Uncommon ProfitsTHEWA R R E NBUF FET TWAYTHEWA R R E N BUFFETTWAYS econd EditionROBERT G. HAGSTROMJohn Wiley & Sons, 2005 by Robert G.

4 Hagstrom. All rights by John Wiley & Sons, Inc., Hoboken, New simultaneously in part of this publication may be reproduced, stored in a retrieval system, ortransmitted in any form or by any means, electronic, mechanical, photocopying,recording, scanning, or otherwise, except as permitted under Section 107 or 108 ofthe 1976 United States Copyright Act, without either the prior written permissionof the Publisher, or authorization through payment of the appropriate per-copy fee tothe Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923,978-750-8400, fax 978-646-8600, or on the web at Requeststo the Publisher for permission should be addressed to the Permissions Department,John Wiley & Sons, Inc.

5 , 111 River Street, Hoboken, NJ 07030, 201-748-6011,fax of Liability/Disclaimer of Warranty: While the publisher and author have usedtheir best efforts in preparing this book, they make no representations or warrantieswith respect to the accuracy or completeness of the contents of this book andspecif ically disclaim any implied warranties of merchantability or f itness for aparticular purpose. No warranty may be created or extended by sales representativesor written sales materials. The advice and strategies contained herein may not besuitable for your situation. You should consult with a professional where the publisher nor author shall be liable for any loss of prof it or any othercommercial damages, including but not limited to special, incidental, consequential, orother general information on our other products and services, or technical support,please contact our Customer Care Department within the United States at800-762-2974, outside the United States at 317-572-3993 or fax also publishes its books in a variety of electronic formats.

6 Some content thatappears in print may not be available in electronic books. For more information aboutISBN 0-471-64811-6 Printed in the United States of products, visit our web site at to the Second EditionviiBill MillerForeword to the First EditionixPeter S. LynchPrefacexvIntroductionxixKenneth L. Fisher1 The World s Greatest Investor12 The Education of warren Buffett113 Our Main Business Is Insurance : The EarlyDays of Berkshire Hathaway294 Buying a Business415 Investing Guidelines: Business Tenets616 Investing Guidelines: Management Tenets817 Investing Guidelines: Financial Tenets1098 Investing Guidelines: Value Tenets121viCONTENTS9 Investing in Fixed-Income Securities14110 Managing Your Portfolio15711 The Psychology of Money17712 The Unreasonable Man189 Afterword.

7 Managing Money the warren buffett Way199 Appendix211 Notes225 Acknowledgments235 Index239viiForeword to theSecond EditionWhen Robert Hagstrom f irst published The warren buffett Wayin 1994, it quickly became a phenomenon. To date, more million copies have been sold. The book s popularity is atestimony to the accuracy of its analysis and the value of its time the subject is warren buffett , it is easy to become over-whelmed by the sheer size of the numbers. Whereas most investorsthink in terms of hundreds or perhaps thousands, buffett moves in aworld of millions and billions. But that does not mean he has nothingto teach us.

8 Quite the opposite. If we look at what he does and hasdone, and are able to discern the underlying thinking, we can modelour decisions on is the profound contribution of Robert s book. He closelystudied warren buffett s actions, words, and decisions for a number ofyears, and then set about analyzing them for common threads. For thisbook, he distilled those common threads into twelve tenets, timelessprinciples that guide buffett s investment philosophy through all cir-cumstances and all markets. In just the same way, they can guide enduring value of Robert s work is due to this clear focus al-though the book talks about investment techniques, it is fundamentallyabout investment principles.

9 And principles do not change. I can almostviiiFOREWORD TO THE SECOND EDITION hear warren saying, with his wry smile, That s why they call themprinciples. The past ten years have given us a vivid demonstration of that basictruth. In those ten years, the trends of the stock market changed severaltimes over. We witnessed a high-f lying bubble that made many peoplerich, and then a steep crash into a protracted, painful bear market be-fore the market f inally hit bottom in the spring of 2003 and started toturn back along the way, warren buffett s investment approach neverchanged. He has continued to follow the same principles outlined inthis book: Think of buying stocks as buying fractional interests in wholebusinesses.

10 Construct a focused low-turnover portfolio Invest in only what you can understand and analyze Demand a margin of safety between the purchase price and thecompany s long-term valueBerkshire Hathaway investors, as usual, reap the benef its of thatsteady approach. Since the recovery began in 2003, Berkshire Hathawaystock is up about $20,000 per share, more than 30 percent, far surpass-ing the returns of the overall market over the comparable is a chain of thinking for value investors that begins withBenjamin Graham, through warren buffett and his contemporaries, tothe next generation of practitioners such as Robert Hagstrom.