The 12 Commandments of Warren Buffett’s Hero, Philip Carret

The 12 Commandments of Warren Buffett’s Hero, Philip Carret
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Late last year The Telegraph did a great piece on value investing legend Philip Carret, who Warren Buffett described as one of his hero’s.

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After founding his Pioneer Fund in 1928, one year before the great depression, Carret successfully steered his fund consistently upwards through the Great Depression and the Second World War and his career ultimately encompassed a total of 31 bull markets, 30 bear markets and 20 recessions.

Carret was one of the first to write about “value investing” in a series of Barron’s articles in 1927. He developed this concept in his 1930  book The Art of Speculation, where his “12 commandments for speculators” first appeared.

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This is a must read article for all serious value investors that includes Carret’s twelve investing commandments and five of his most famous quotes.

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Here's an excerpt from that article:


Inspired by this, in 1928 Carret put his own ideas into action and founded the Pioneer Fund. This spawned Pioneer Investments, now a giant global fund management firm.



Carret’s connections with the Buffetts

Carret first encountered the Buffett family in the Forties when he would visit Warren’s father, Howard Buffett, who ran a small brokerage firm in Omaha, to swap investment ideas.

Later, Warren Buffett’s company, Berkshire Hathaway, became Carret’s most successful investment. He bought shares in the Sixties for less than $400 a time because he was impressed with Buffett’s management. The shares now trade for more than $220,000 each.

Carret was personally invited to Berkshire Hathaway’s annual meetings; nicknamed “Woodstock for capitalists”: these events nowadays attract a vast attendance.

At the 1996 meeting, Buffett said of Carret’s investment style: “The main thing is to find a wonderful business, like Phil Carret always did. He’s one of my heroes, and that’s an approach he’s used.”

One of Mr Buffett’s most famous quotes is “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years”, and it has echoes in Carret’s own approach, outlined in The Art of Speculation: “I have a very simple strategy, I buy good companies at attractive prices. Then I sit on them.”



Both choices chime with Carret’s answer to a question he was once asked in a television interview: “What is the single most important thing that you have learned about investing over the past three quarters of a century?” His reply: “Patience.”


You can read the original article at The Telegraph here.

This article was originally posted by Johnny Hopkins at The Acquirer's Multiple.

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The Acquirer’s Multiple® is the valuation ratio used to find attractive takeover candidates. It examines several financial statement items that other multiples like the price-to-earnings ratio do not, including debt, preferred stock, and minority interests; and interest, tax, depreciation, amortization. The Acquirer’s Multiple® is calculated as follows: Enterprise Value / Operating Earnings* It is based on the investment strategy described in the book Deep Value: Why Activist Investors and Other Contrarians Battle for Control of Losing Corporations, written by Tobias Carlisle, founder of The Acquirer’s Multiple® differs from The Magic Formula® Earnings Yield because The Acquirer’s Multiple® uses operating earnings in place of EBIT. Operating earnings is constructed from the top of the income statement down, where EBIT is constructed from the bottom up. Calculating operating earnings from the top down standardizes the metric, making a comparison across companies, industries and sectors possible, and, by excluding special items–earnings that a company does not expect to recur in future years–ensures that these earnings are related only to operations. Similarly, The Acquirer’s Multiple® differs from the ordinary enterprise multiple because it uses operating earnings in place of EBITDA, which is also constructed from the bottom up. Tobias Carlisle is also the Chief Investment Officer of Carbon Beach Asset Management LLC. He's best known as the author of the well regarded Deep Value website Greenbackd, the book Deep Value: Why Activists Investors and Other Contrarians Battle for Control of Losing Corporations (2014, Wiley Finance), and Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors (2012, Wiley Finance). He has extensive experience in investment management, business valuation, public company corporate governance, and corporate law. Articles written for Seeking Alpha are provided by the team of analysts at, home of The Acquirer's Multiple Deep Value Stock Screener. All metrics use trailing twelve month or most recent quarter data. * The screener uses the CRSP/Compustat merged database “OIADP” line item defined as “Operating Income After Depreciation.”
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