Saturday, January 5, 2013

Tap Dancing to Work: Warren Buffett on Practically Everything, 1966-2012, by Carol Loomis

I am a fan of Warren Buffet, both of his investment model (value and long term thinking) and his view of business ethics (keep it simple, true and transparent).   Similarly of his long time associate and vice-chairman of Berkshire, Charlie Munger, whose book ("Poor Charlie's Almanack) I gushed about back in 2007.

Several books have been written about Mr. Buffet, one of which, by Peter Bevelin, was less a biography and more an introductory text to basic business.

Ms. Loomis' book is quite different:  she collected all the Fortune Magazine articles about Mr. Buffet up through mid 2012 into this well edited book.   So the reader gets a very long term view of the subject and also a view of the changing economic times of this period, since Fortune obviously prints materials that meets its audiences' interests.

If you're a fan like me, you'll enjoy this book.   Even if you're non-committal about Mr. Buffet, the book provides many good lessons on investment strategy, some on ethics, quite a bit on philanthropy (although the counter effect of the work that Mr. Buffet and Bill Gates do together in this space is that it hardly seems worth while for me to throw my nickel into a pot dominated by their billions).

If you're an investor in Berkshire Hathaway, or want to be, you'll get a sense of how the chairman runs the business.   It might be a good investment to own their shares, although returns of the last decade don't look as great as the prior three decades(1).   As of this writing, the A shares are at $140,803 each, which seems pricey.   The B shares are $93.85 each, which fits the rough formula that a B share is worth 1/1500th of an A share (and has 1/10000th the voting rights).

Finally, even if this book sounds like a yawn to you, if you are at all interested in business or investing, I suggest the habit of reading Mr. Buffet's amazing letters to shareholders, his being the most interesting of any firm's annual report.

(1) This assertion clearly demands a footnote.   The share price has not been distinguished in recent years; valuation has not kept up with even the S&P 500.    This, however, doesn't tell the entire story.  Net income per share has grown faster than the S&P 500's earnings, as has book value (at nearly 10% / year).  The graph below shows the comparison of BRK:A to the S&P 500 for the past five years.  Is the stock is a bargain?  The PE is of this writing 17.45, price to book is 1.26.

Data from on 5 January 2013.

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