Warren Buffett Way (2nd edition) book review

The Warren Buffett Way (2nd edition) was written by Robert G. Hagstrom way back in 2005.

Even though, the book is nearly 20 years old, it is still considered to be a great insight into the man considered the world’s greatest and most successful investor.

Who is Robert G. Hagstrom, he was the Senior Vice President of Legg Mason Capital Management as well as being the portfolio manager of the Legg Mason Growth Trust.

The original book was published in 1994 sold more than 1,000,000 copies worldwide and spent 21 weeks on the New York Times bestseller list. This book is a successful follow up to his original masterpiece.

Amazon link to buy the book: https://amzn.to/4jeHy2m

Initial Book Summary: 

It starts off with a foreword section in which Robert studies Buffett’s words, actions and decisions for a number of years.

It is then broken them down into 12 tenets, which are considered timeless principles that follow Warren Buffett’s investment philosophy and beliefs.

The allure of the book is the clear focus about his investment techniques and principles. No matter what period of time the principles stated don’t change. Although market conditions and external factors that drive the market may alter over time.

With the main investment principles being:

• Think of buying stocks as having a fractional ownership of that business.
• Construct a core low turnover portfolio.
• Invest in what you know and understand.
• Demand a margin of safety between the purchase price of a stock and it’s true value.

There is then a foreword to the first edition by Peter Lynch. In which he encounters how he first met Warren Buffet. How their mutual acceptance of each other as successful investors created a bond between them.

He recalls his traits and give examples on some of his purchases and the reasons why he bought them. He also alludes that you can copy him to a degree by creating a “circle of competence“. In that you don’t have to get every trade right but limit the mistakes that you make over time.

This book created the thinking and philosophy that any investor can consistently make money each year using the tools available to them. Whereby their returns will be better than most investors.

(amazon link to purchase): https://amzn.to/4jeHy2m

So what is included in the contents of the book ?

• Foreward to the second edition (written by Bill Miller)
• Foreward to the first edition (written by Peter Lynch)
• Preface (written by Robert Hagstrom)
• Introduction (written by Kenneth Fisher)

Chapters:

•  1: The World’s Greatest Investor (10 pages)
• 2: The Education of Warren Buffett (18 pages)
• 3: Our main business is Insurance – The early days of Berkshire Hathaway (11 pages)
• 4: Buying a Business (20 pages)
• 5: Investing Guidelines: Business Tenets (20 pages)
• 6: Investing Guidelines: Management Tenets (27 pages)
• 7: Investing Guidelines: Financial Tenets (11 pages)
• 8: Investing Guidelines: Value Tenets (20 pages)
• 9: Investing in Fixed-Income Securities (15 pages)
• 10: Managing Your Portfolio (20 pages)
• 11: The Psychology of Money (12 pages)
• 12: The Unreasonable Man (10 pages)

Afterword: Managing money the Warren Buffett Way (12 pages)

Appendix: Summary of yearly stock portfolio of Berkshire Hathaway from 1997 to 2003. (14 pages)

Notes: Summary of quotes and references used by author (10 pages)

Acknowledgements: List of thank you and helpers used by the author (3 pages)

So what do I find enjoyable about the book ?

The chapters are simple and concise and the writing style is easy to follow and understand. Sometimes investing books can include too much financial jargon and acronyms which confuse people, which results in people losing interest.

The book provides some great insights in the working of Warren Buffett and how he has achieved exceptional returns over many years.

It highlights the rational behind his thinking and investment philosophy.

The book will not promise that you too will have the same returns as him.

But it proves that if you concentrate on some very simple and key points who will be rewarded handsomely for avoiding short term market noise and sentiment and think long term term about picking a few and selected quality companies.

Conclusion:

As an investor, you don’t have to pick every share out there, you only have to get a few investments right, over the course of your lifetime.

But by taking large stakes and thinking as being a fractional owner of that business your mindset and long term thinking will change.

With regard to the author and his rational for the book. You can see that he has taken the time and dedication to study and learn from Warren Buffett, to produce a very good and education reading experience.

Overall a very good read, providing great insight into the so-called world’s greater investor.

This summary is my own personal opinion based upon the numerous times that I have read the book over the past few years. It’s a book that stands the test of time with regard to investing, no matter how the markets have changed since it was written way back in 2005.

Amazon link to buy the book: https://amzn.to/4jeHy2m

Remember !

If you like this book summary, follow the links on https://moneyminted.co.uk to cover other investing books that I recommend reading. Along with posts on saving, investing, pensions so hopefully improve your investing knowledge, so you can read your financial goals and aims.

It’s not a get rich quick journey, but you will get there in the end if you create an action plan and think long term.