Warren Buffet

When reading Warren Buffet’s partnership writings to his partners, from his original partnership, you will notice many ideas that are very interesting. What is captivating about his writings to his investors is that these memos were written before the time that Buffet was known in the investment world as a great stock picker. He was 25 years old when he founded the business and he was running the equivalent of less then one million dollars in 2010 inflation adjusted dollars. At the time he started the partnership he had just finished working for 2 years in New York City working for his famous Columbia Business School teacher, Ben Graham.

There are a lot of illusions about how Buffet invested in his early days. His partnership letters help shed some light on what sort of investment choices he was making at the time.  His early and relatively less famous partnership letters are extra important for many at home, do it yourself, investors. Because honestly most of us are investing less than 1 million dollars, just like Buffet when he first started, but he eventually became the richest man in the world. To most “home gamers” these letters are vital because unlike the Berkshire Hathaway letters of  present time, Buffet wasn’t investing billions of dollars. And he wasn’t causing the prices of stocks to move up or day simply because he was buying or selling stock. Essentially, when these letters were written, Buffet was just like most of us, but then he began compounding his money…

Warren Buffet’s Value Investing techniques to his first million dollars and more – The Buffet Partnership Letters
In his now world renowned letter, the Super Investors of Graham Doddsville, Buffet speaks of the success of his investment partnership, which was doing business over the course of 1957 to 1969. The partnership made 29.5% annually, limited partners received a annual return of 23.8% annually. The difference between the {2 (general partnership and limited partnership) is mostly the management fees (the amount Buffet got to keep himself for helping to make his investors Over the same period the Dow Jones returned 7.4% annually. This means that before Buffet took a portion of the returns for managing the investments, he was able to outperform the stock market by 22.1% every year!

These early Buffet letters can be quickly and easily found by most search engines. When you do find these letters and read them, you might notice one very interesting thing. That is that Buffet’s technique, at that point in time, was primarily buying extremely cheap companies, waiting for the price of these companies to appreciate to their value and them sell them. He would then repeat the process over and over. This contrasts with Buffet’s technique of today, which is buying a wonderful company at a reasonable price and holding it forever.

Both techniques are fantastic and highly profitable, but many people will argue that reason why Buffet changed his technique is not due to a change in thinking or philosophy, but rather a change in the amount of money that he was controlling. If the technique of buying very cheap companies worked for a young Warren Buffet, it might just work for anyone who applies the method.