Writing books about Warren Buffett is a bit of a cottage industry, and one that is getting scarce for new ideas. This book takes a new approach because the author takes 20 companies that Buffett bought, and analyzes them himself using principles derived from things Buffett has written.
That brings me to my first critique of the book. You are getting the author’s point of view for analysis, which is somewhat similar to Buffett’s, but is usually not Buffett’s view. In a minority of cases he references something Buffett wrote at the time. He did not interview Buffett for this book, which is normal for most books about Buffett.
After 10.1% Return In 2020, Mohnish Pabrai Changes Strategy [2020 Letter]
Mohnish Pabrai's flagship hedge fund, the Pabrai Investment Fund II, returned 29.6% in the second half of 2020. Following this performance, the fund returned 10.1% net for the year, underperforming the S&P 500 but outperforming the Dow Jones Industrial Average, which returned just 9.7%. According to a copy of the investment manager's year-end letter to Read More
Buffett didn’t typically do simple analyses, though by the end, he could simplify them to make it understandable to average people. I’m not saying Buffett’s math wasn’t simple; I am saying that he took great account of qualitative aspects of a business — honest & competent management, owner earnings (free cash flow), moats (sustainable competitive advantages), ability to reinvest excess earnings profitably, etc. The author takes account of many of these things much of the time, but my view is that Buffett did more still. Also, Buffett spent more time on margin of safety issues than the author did.
My second critique is that the book is a lot shorter than it looks. Many of the pages are filled with the financials of the companies being analyzed, and only a tiny portion of the data there is referenced by any analysis in the book. The book of 260 pages is more like 200 in total length. For some readers that will be a plus, for others a minus.
The book does well in picking a range of investments by Buffett in terms of success. Some of his less successful decisions are here — Berkshire Hathaway itself, US Air, Salomon Brothers, Gen Re, and IBM. It also looks at investments where Buffett bought it all, and where Buffett bought part of a company. Additionally, it covers investments initiated over a long time, ranging from the partnership years to the present.
My third critique is that in addition to the financial data, there is occasionally more padding in the book than needed — an interview of Buffett by Matt Rose of BNSF stands out, though many of the descriptions of the businesses involved could have been tighter.
On the whole, it is a good book, giving the opinions of another value investor on twenty asset purchase decisions by Buffett. Those familiar with Buffett will probably want to pass by the book; better to read Buffett himself. Newer investors could benefit from the author’s viewpoint, as it gives a consistent way to build a value investing philosophy in a single book.
Summary / Who Would Benefit from this Book
Those more experienced with Buffett’s own writings could ignore this book. Those who are newer to value investing could benefit. If you want to buy it, you can buy it here: Inside the Investments of Warren Buffett: Twenty Cases.
Full disclosure: The publisher asked me if I wanted a free copy and I assented.
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