Despite all the writings about Warren Buffett’s Berkshire Hathaway, it’s mostly a high level view.
We know the basics of when and why Buffett turned Berkshire Hathaway into an investment vehicle, but not enough about the details, the historical context and the reasoning behind the decision which has led to the mammoth Berkshire Hathaway it has become today.
Last year was a banner year for hedge funds in general, as the industry attracted $31 billion worth of net inflows, according to data from HFM. That total included a challenging fourth quarter, in which investors pulled more than $23 billion from hedge funds. HFM reported $12 billion in inflows for the first quarter following Read More
Today's email goes a mile deep into the "how" that could have led to Buffett's transformation that put him on the map.
But a thought for you to process first before we get into it.
Prof Aswath Damodaran, in his Google Talk "Valuation: Four Lessons to Take Away", put into context an idea that I've had difficulty articulating.
People ask me how to value stocks, and I tell them it's both quantitative and qualitative.
For newer or less experienced investors, this doesn't ring a bell. I get blank nods.
But what Prof Damodaran tries to achieve with his valuation class is for "numbers people to have imagination, and for story people to have discipline."
Well what does this mean?
In the investment world, most define themselves in one camp. Numbers based or story based.
The two rarely get through to each other.
Value investors lean more towards the numbers side, whereas IPO investors and VC's are all story based.
However, think about the best investment theses you've read.
One that I clearly remember is Ackman's thesis for GGP back in 2009 where he helped me make 1,000%.
My first 100 bagger.
Ackman didn't just talk about the numbers, he had the creativity and imagination to see the possibilities. The current valuation was the starting point, and he was able to visualize the end goal. (Then used his influence to act on it.)
Rather than just looking at the current numbers and coming up with a final valuation, identifying the correct stories to prove your valuation right or wrong is the key factor.
That's where today's VIP resource comes into play.
I've heard people discount Buffett's ability because he has "easy money". But he didn't get to where he is now with blind luck.
Read the presentation and discover some of the imagination and creativity Buffett applied to build Berkshire into what it is today.