Inside the Investments of Warren Buffett: Twenty Cases

Warren Buffett’s investment acumen is frequently celebrated but less often analyzed, and those analyses are rarely as thorough or dispassionate as this one from debut author Lu, a portfolio manager at Shareholder Value Management. Lu has selected 20 companies—some obscure (the Sanborn Map Company), some household names (IBM, Coca-Cola)—in which Buffett obtained an interest between 1958 and 2011. Through historical research and financial statement analysis, Lu has attempted to divine what Buffett saw in them. Some common themes emerge. Buffett preferred, as he quipped, to buy a wonderful company at a fair price rather than a fair company at a wonderful price. He also looked for transparency; consistent earnings growth or compounded returns; good management; and opportunities to outperform the stock market through undervalued securities, “workouts,” or “control situations.” One of Lu’s conclusions is that it is indeed possible for ordinary investors to replicate Buffett. She reveals a cautious, methodical investor who sought businesses with structural advantages that grew over time and who also, in demanding a “margin of safety,” seldom risked capital. For serious investors and analysts eager to transcend the cult of personality around Buffett and discern what actually makes him great, this study comes highly recommended. (Aug.)