Is it just me, or is "Buffettology" simply a bad
book? I just finished skimming it. I read word for word
until they starting explaining the difference between a
stock and a bond, starting skimming and couldn't stop.
It is bad enough that it was written in what was to
me anyway an irritating, condescending style. But
who is this book written for? Evidentially the
audience for this book needs to have an IPO explained. And
the audience for this book needs to be instructed
concerning inflation that "This hurts us as investors. If we
hold on to dollars they will lose their value at the
equivalent of the rate of inflation. So if inflation is
running at 25%, your money will be losing its purchasing
power at the rate of 25% a year. Thus, Warren believes
that if you have an inflation rate of 25% you must get
at least a 25% return on your investment in order
for the real purchasing power of your wealth to stay
even with inflation." Yet the audience for this book
is also pretty sophisticated. They claim that "Now
that you are equipped with some Buffettology, you
should be able to bring in an average return of, say, 15
to 25% compounded annually over the long term." and
you should go set up your own investment partnership.
25% a year! My have we come a long way in such a
They state with great confidence
that Buffett, or as they say, Warren, "figures out
approximately what the equity value of the company will be at
the future date, say, in ten years, and then he
multiplies the per share equity value by the projected
future rate of return on equity ten years out, which
gives him the projected future per share earnings of
the company. Using the projected per share earnings
of the company, he is then able to project a future
trading value for the company's stock, Using the price he
paid for the stock as the present value, he can then
calculate his estimated annual compounding rate of return."
Has anyone ever read or heard of Buffett himself
claiming to do this? Munger has stated that he has never
seen Buffett do anything like this.
anyone else see this book as dangerous? Their
"comparison of Coca-Cola per share earnings projections to
actual results" on page 225 provides a result that could
only be accomplished by backward determination or
coincidence. I have never seen anything in the investment
world work out so perfectly.
dismissal of everything "Wall Street" is irritatingly smug.
Do you remember 1987 like this? "To make a long
story short, everything worked out, and you and I are
still here, along with all the brilliant Gomer Pyles on
Wall Street. 'Hey, Gomer! S&P 500 is down 10%. Time to
sell 50% of our investment portfolio."
go on, but why.
I would be interested in the
opinions of others who have read this book. If I am out of
step with everyone else in the world, I will accept
that and just keep myself away from polite society.
Although my reaction to the book wasn't as
strongly negative, I didn't feel the book brought anything
new to the table. I also bought the book and have
read it a few times. It is definately geared towards
It's not too bad a place to start if
you're a beginner and you don't know the difference
between the intrinsic value of cash and the intrisnic
value of earnings.
I've read Buffettology several
times as a matter of fact. I can't say I share your
views on it.
A few years back I got very
interested in the stock market except I was pretty much
exclusively interested in technical analysis. I bought many
books, software, data services, studied like crazy,
studied and then wrote systems, wrote a complex for me
computer program to do all sorts of calculations. Then I
did what I consider extensive system testing. I lost
hunderds of dollars, tested some more and finnaly realized
that for me, I did not like the statistical
approach...72% chance of gain, 28% chance of loss.
end, it was too much work to pick a stock, do all the
analysis and then...it was out of my hands...a coin flip
kind of situtation. After this I started to look at
This lead me to Buffett books.
A poor book on fundamental analysis is better
than an excellent book on technical anaylsis. I would
recommend The Intelligent Investor to you.
Buffettology seems to be a book for beginning investors that
is combined with an attempt to explain Buffett's
methods. Unfortunately for me anyway, it failed to
accomplish either. I have read five other books about
Buffett and read all of his shareholder letters for the
last 20 or so years, so maybe there was just nothing
new for me. I am glad that it worked for others.
But besides the style of writing, what really annoyed
me was that it seemed at odds with the impression I
have received from every other source regarding his
methods. I have never heard that he actully makes all of
these projections that are discussed so much in the
book. He doesn't even own a calculator. If all Buffett
did was to compute the historical earnings growth
rate and project that in order to make his investment
decisions, he would not have had the success that he has
enjoyed. Anyone can do that. My guess is that he uses
those models in his head that Munger talks about to
determine an appropriate share price.
difference that Buffett brings to the party is that he, for
whatever reason, can very clearly see what is really going
on today and then what will happen in the future. He
does not just project the future based on the past. I
know that no one, not even Buffett can explain how he
is able to do that. Munger probably could give a
better explanation than Buffett can. But, IMHO, it is
that ability to see reality and patiently act on it
that creates much of his success. This is where the
book fails in its attempts at explanation.
example. On page 142-143 they discuss the Wells Fargo
purchase. I remember that period of time. Buffett's
purchase of shares in Wells Fargo was a very gutsy move
because it was a big real estate lender in California and
real estate in that state was in a free fall. Some
were predicting that Wells would go under. What I am
interested in is how Buffett determined that the loan
provisions on Wells books were adequate. This was not
addressed. They mention that the losses never reached the
magnitude expected, but that is after the fact knowledge.
The investment decision is made when the magnitude of
the losses is unknown. Looking at past history of
that bank or any other bank would not help answer
that. To me, that is what Buffett is all
I think that the best way to understand what he
does is to read his own words. I received the
Cunningham book in the mail today. It looks like there are
about 200 pages of Buffett in it. I have not read it
yet, but if someone wants to understand what he does,
that looks like the place to start.
After reading many Buffett books as well as The
Intelligent Investor, and I think one or two books on Graham,
I became convinced that "intelligent" investing
makes the most sense for me. It felt right. Then I came
across the Hagstrom book. I read and re-read and made a
spreadsheet to emulate his theories in the book.
became frustrated with the two time periods (growth
periods) used in his discount model. I ordered from the
library the Theory of Investment Value to try to look at
some very early intrinsic value computation
While I have had great interest, I admit I do not
understand a lot of the things I have come across. But if
you do enough self learning, eventually you get a
feel for whether you are on the right track or not. I
was trying to balance out my various questions when I
heard a new Buffett book was
I have not read the book, but expected it to be
It is VERY hard to write good books
when the author is torn apart by conflict of interests
(ie, interest of truth vs. interest to make money by
selling accompanying items, websites etc). Apparently,
they were driven by money to a lot greater degree than
by a desire to discover and describe something
Just the name of the book itself makes me
The other problem is that fairly complex things (that
are no rocket science, though) are now explained to
general public who cannot tell a stock from a
That sometimes leads even smart people (eg, hagstrom)
write stupid things that just are not true and/or
useful. Whereas if they targeted their writings to people
who know how accounting works, they would end up
doing a lot better job.