Buffett: The Making of an American Capitalist
The gain in net of Berkshire Hathaway, the company led by Warren Buffet, worth during 2006 was $16.9 billion, which increased the per-share value of 18.4%. Over the last 42 years value has grown from $19 to $70,281, a rate of 21.4% compounded annually. Consider that $16.9 billion is a record for a one-year gain in net worth - more than has ever been booked by any American business, leaving aside boosts that have occurred because of mergers. Of course, Berkshire did not outperform S&P500 constantly. In 1967, 1975, 1980, 1999, 2003, 2004 the S&P gave better performance, and in 2001 Berkshire even was at a loss of 6.2%.
This book, "Buffett: The making of an American capitalist" covers very deeply the values that led Warren Buffet during his life from his early childhood. The book is not only a biography per se, but a good manual on investing, that uncovers most aspects, with the detailed explanations and samples, of investing.
This book also covers very well personal traits of Warren Buffett, his attitudes toward parents, sister, friends, parents, children and wife. For example, Warren bought a farm and rented it to his son Howie on standard commercial terms. The farm was a joyful refuge to Howie, but he couldn't get Warren to share the experience with him. "I can't get him to come out and see how the crops are going", Howie said plaintively. Warren went only twice in six years. He would laugh off Howies's invitations, saying, "Send me a rent check, and make sure it's big enough". Though he had been thoughtful enough to buy the farm, he couldn't give Howie the fatherly recognition that he craved in other than financial terms.
In his investment strategy, Warren uses the concept that he calls "Intrinsic value" of a company. According to Warren Buffet, intrinsic value is an all-important concept that offers the only logical approach to evaluating the relative attractiveness of investments and businesses. Intrinsic value can be defined simply: It is the discounted value of the cash that can be taken out of a business during its remaining life.
Here is what Kenneth L. Fisher wrote about Buffet's investment strategy: a quality standing out about Mr. Buffett is his ability to morph. If you read his materials from the 1960s, he said very different things than in the 1970s and early-1980s. Early on he was buying dirt-cheap stocks by simple statistical standards and typically smaller stocks--which would today be referred to as smallcap value (although that term didn't exist until the late 1980s). Later he bought what he called "franchises." Then he entered a period of buying great managements of big companies and being a long-term holder--otherwise thought of as big-cap growth today--that many ascribed to the influence of my father coupled with Charlie Munger. When Mr. Buffett was buying Coke and Gillette, you couldn't quite reconcile those activities with the kinds of things he owned two decades earlier. Then, amazingly, seven years ago, at just the right time, he was buying smaller things dirt cheap again just as value came back into play as the twenty-first century began. I have other comments about Mr. Buffett throughout this book but I'd like you to see, while he never lost the core of what he was doing or what he was looking for, he tactically morphed steadily over the decades. Trying to freeze his tactics from any decade and replicate them in the next few would never have led you to his actual actions.
In addition to this book, I also recommend the letters to shareholders written by Warren Buffet, which can be taken from the website of Berkshire Hathaway. If you take an audio record of this title, it will not be as good as the textbook. The audio is more biographical and pays less attention to the investment education of the listener.