A $10,000 investment in Warren Buffett’s original 1956 portfolio would today be worth a staggering $250 million … after taxes! What are his investing secrets? How to Pick Stocks Like Warren Buffett contains the answers and shows, step-by-profitable-step, how any investor can follow Buffett’s path to consistently find bargains in all markets: up, down, or sideways. How to Pick Stocks Like Warren Buffett sticks to the basics: how Buffett continually finds bargain stocks passe…
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Legendary billionaire Warren Buffett is considered by many to be the world’s greatest value investor. “How To Pick Stocks Like Warren Buffett” is a book that guides the ordinary investor though Buffett’s methods to profit using his bargain hunting strategies.
As Buffett is quoted as saying in the book, “To invest successfully, you need not understand beta, efficient markets, modern portfolio theory, option pricing or emerging markets. You may, in fact, be better off knowing nothing of these. That, of course, is not the prevailing view at most business schools, whose finance curriculum tends to be dominated by such subjects. In our view, though, investment students need only two well taught courses – How to Value a Business, and How to Think About Market Prices.”
“How To Pick Stocks Like Warren Buffett” does detail effectively, in easy-to-understand language, Buffett’s methodology in analyzing and evaluating businesses and attitudes about market prices, as well as the investment decision-making process, and philosophy about developing good investment habits.
Buffett’s rules and methods for investment success are carefully outlined, including the importance of developing a mathematical mind, using a buy-and-hold strategy for companies with strong franchises, growing book value and return on equity, using the magic “15 Percent Rule”, comparing stocks to bonds, avoiding losses, and stringing small gains together with takeovers.
“How To Pick Stocks Like Warren Buffett” contains charts and case studies with pertinent and contemporary examples, including studies of technology companies. A chapter, “Your Competitive Advantage Over Buffett – The Internet”, details several web sites that provide information, research and investment tools for value-oriented investors.
This book is relevant for value conscious investors who wish to formulate an intelligent and consistent approach to investment management.
First of all, the author does describe early Buffett activities as some sort of shady active trading/arbitrage, i.e. anything but value investing. That is a plus, and Timothy Vick should be credited for honestly admitting that. Reading from page 13, Buffett’s estimated net worth in 1969, the year he shut down his speculative Buffett partership, was $20 to $25 million. You can disregard everything else in this book, because once you have made $20 million through active trading/arbitrage, does it really matter what you do for the rest of your life?
If Buffett made his fortune and got his start in investing through active trading, what’s the point of extolling buying and holding and value investing?
Let me rephrase the question, can a buy-and-hold value investor make $20 million in 12 years starting with 50K ? Of course not. If you want to get rich, AVOID value investing.
So, once you are as rich as Buffett was in 1969, you can certainly afford to condemn active traders and speculators because A) you don’t have to ever work and can live off dividends or interest on Treasuries B) you can settle for 10% or so percent annualized return on your value stocks.
Second, the author lists Buffett’s core holdings (AXP, G, KO, WPO, MTB, etc) and claims they have had a fabulous return over the years, and these “value investments” are the reason Berkshire book value was going up 25% or so annually. False and wrong. If you do the math, market price of most of these stocks went up from 5% to 10% annually (one or two exceptions at 18%). So much for fabulous stock picking! So why did Berkshire book value go up so fast? The answer is, probably because Buffett is a great manager and did a good job running his core insurance businesses and managing the cash flow of the companies he acquired and controlled. You have to understand the difference between buying and holding stocks you have no control over (value investing), and successfully running a business you own, taking over and controlling other companies, and awarding yourself compensation exceeding the gains of other shareholders (what Buffett has done throughout most of his career, but not lately). Is running a large insurance company equivalent to value investing? Probably not. There is a big difference between holding a piece of paper and running/cotrolling a business.
Multi-billionaire Warren Buffett does not hide the fact that his goals are to amass wealth–and neither does Mr. Vick’s book. The author’s book mirrors the extraordinary passion (for, after all, Mr. Buffett invests in people–and passionately, as readers shall learn) that drives the unprecedented success of the holding company Mr. Buffett manages, Berkshire Hathaway.
This book was written by a self-professed “disciple,” not a biographer, of Mr. Buffett, his work, both past and in-progress. For a novice such as I, the book was anything but a “soap box” preaching on “how to become.” Rather, this is a magnum opus–a comprehensive, easy-to-follow true “inside look” at a buck-the-trend investor–the very principles, products, services and industries he understands through “years of the fun of making money and watching it grow.”
Sure, Mr. Vick “scratches the biographical surface” of this legendary professional–how could he not? After all, Mr. Vick himself has come to know Mr. Buffett–through extensive research, Mr. Vick’s own tried-and-true Contrarian investing and more. “How to Pick Stocks Like Warren Buffett” contains unique insight on Mr. Buffett, the man, and Mr. Buffett’s strategies for gaining market-winning results, estimating a company’s future earnings and measuring the yardstick of this mentor’s investment portfolio.
Written by an award-winning journalist and analyst who routinely offers objective and articulate insight to the national media, including TV and radio–I’ve taken the trouble to track his quotes; hence, my submission of my review–this book was a great starter for a reader who simply wanted to know more about this legendary figure–and the professional, particularly, his convertibles, options and other “secret weapons.”
At worst, it’s a mere tool for helping to shape–agree or disagree with Mr. Vick’s/Mr. Buffett’s philosophy–your own investment strategies. Are you into arbitrage? Read and learn. At its very best, this book shines with its breadth on Mr. Buffett’s lead. It’s filled with in-depth tips for how to follow Mr. Buffett’s clearly outlined set of tracks.
Again, this was written with keen turn-of-phrase–concisely and with the understated depth of a consummate newspaper reporter and analyst extraordinaire. A real page-turner. I’ve read Mr. Vick’s previous books; I now look forward to his next.