“A fundamental principle: It is better to be approximately right than precisely wrong.” ~Warren Buffett
Lawrence A. Cunningham’s spectacular book, The Essays of Warren Buffett: Lessons for Corporate America, outlines the mind and investment strategies of Warren Buffett.
Since its inception in January 2012, the long book of the Voss Value Fund, Voss Capital's flagship offering, has substantially outperformed the market. The long/short equity fund has turned every $1 invested into an estimated $13.37. Over the same time frame, every $1 invested in the S&P 500 has become $3.66. Q1 2021 hedge fund Read More
Cunningham’s work expertly welds together chunks of Buffett’s educational essays on topics that span the entire continuum of issues that investors face (see his guest post on ValueWalk, Origins and Value of The Essays of Warren Buffett: Lessons for Corporate America).
Whether you’re curious about which organizational designs constitute the best business practices, the way a business should structure its stock options and compensation plans, or simply the thought processes of a successful investor, Buffett manages to explain extremely difficult, complex principles in a succinct and clear way.
Buffett’s material informative and amusing
Throughout each essay, you’ll find empirical examples, relevant quotes, and sometimes lessons from Buffett’s mentors Benjamin Graham and David Dodd. To top it off, some of his material is quite amusing and caused me to literally laugh out loud even in the midst of learning a great amount.
As each page turns, Buffett’s viewpoints grow more compelling as he not only continually mounts justifications for his perspective, but also reminds the reader that he has adopted his unique mentality as a result of considerable experience and initial hardship. This point is quite important because many of Buffett’s views are completely distinct from most contemporary schools of thought, especially the rigid, detached assertions of the academics who love the Efficient Market Theory.
The twist to Buffett’s approach happens on both sides of the investment game.
Warren Buffett despises “revolving-door” investments
As a business owner, he despises the “revolving-door” type of investment situation, where investors quickly buy and sell stock and are then quickly replaced by other interested investors, who repeat the process. Instead, Warren Buffett seeks out investors who will consider themselves life-long owners of the business. In fact, Buffet notes how “over 98 percent of the shares outstanding [in Berkshire] are held by people who also were shareholders at the beginning of the year.”
When the stock market crashes, best time to buy
As an investor, Buffett believes that “all true investing must be based on an assessment of the relationship between value and price.” Consequently, Buffett defies contrary wisdom by suggesting that when the stock market crashes, it’s the best time for investors to buy stocks. Entire companies are sold at greatly reduced prices. The academic wisdom, on the other hand, judges these situations as extremely dangerous because of the level of volatility that the stock is showing. Academics strongly suggest avoiding all stocks that express a high degree of volatility, whether up or down.
The truth and strength of Warren Buffett’s approach, however, are proven through his repeated successes and his standing as the third richest man in the world.
This book is a must-read for anyone trying to reach the same levels of financial security through investing. Check it out here The Essays of Warren Buffett: Lessons for Corporate America