Inside the Investments of Warren Buffett: Twenty Cases

310 Pages·2016·14.58 MB·English

by  Yefei Lu

CASES
NTY
WE
T
U
L

I
E
F
E
Y
INSIDE THE INVESTMENTS
OF WARREN BUFFETT

Columbia University Press
Publishers Since 1893
New York Chichester, West Sussex
cup.columbia.edu
Copyright © 2016 Yefei Lu
All rights reserved
Library of Congress Cataloging-in-Publication Data
Names: Lu, Yefei, author.
Title: Inside the investments of Warren Buffett : twenty cases / Yefei Lu.
Description: New York : Columbia University Press, 2016. | Includes
bibliographical references and index.
Identifiers: LCCN 2015048094 | ISBN 9780231164627 (cloth : alk. paper)
Subjects: LCSH: Buffett, Warren. | Capitalists and financiers—United States.
| Investments. | Portfolio management.
Classification: LCC HG172.B84 L8 2016 | DDC 332.6—dc23
LC record available at http://lccn.loc.gov/2015048094
Columbia University Press books are printed on permanent
and durable acid-free paper.
Printed in the United States of America
c 10 9 8 7 6 5 4 3 2 1
cover design: Noah Arlow
To my love, Nora, and our beautiful daughter, Lily

contents
Acknowledgments ix
Introduction xi
PART I: THE PARTNERSHIP YEARS (1957–1968)
1
1958: Sanborn Map Company 3
2
1961: Dempster Mill Manufacturing Company 17
3
1964: Texas National Petroleum Company 28
4
1964: American Express 34
5
1965: Berkshire Hathaway 53
PART II: THE MIDDLE YEARS (1968–1990)
6
1967: National Indemnity Company 69
7
1972: See’s Candies 73
8
1973: The Washington Post 79
viii CONTENTS
9
  1976: GEICO (Government Employees
Insurance Company) 93
10
1977: The Buffalo Evening News 100
11
1983: Nebraska Furniture Mart 105
12
1985: Capital Cities/ABC 111
13
1987: Salomon Inc.—Preferred Stock Investments 128
14
1988: Coca-Cola 138
PART III: THE LATE YEARS (1990–2014)
15
1989: US Air Group 155
16
1990: Wells Fargo 169
17
1998: General Re 180
18
1999: MidAmerican Energy Holdings Company 197
19
2007–2009: Burlington Northern 211
20
2011: IBM 230
PART IV: LESSONS LEARNED
21
Evolution of Buffett’s Investment Strategy 248
22
What We Can Learn from Buffett 254
Appendix A 263
Appendix B 265
Notes 267
Selected Bibliography 277
Index 279
acknowledgments
This book would not have been possible without the support and contribu-
tions of numerous individuals, all of whom I would like to thank sincerely
for their help.
First, I would like to thank Eddie Ramsden at the London Business
School, who encouraged me to turn what was originally a personal research
project into a full-fledged book. Without his vision on what was still miss-
ing, I would have concluded that there were already too many books writ-
ten about Warren Buffett and would never have ventured to write about
this topic in this form.
I want to thank Bridget Flannery-McCoy and Stephen Wesley at
Columbia University Press, who directly worked with me and together
spent countless hours giving me feedback and editing my writing. Thank
you so much for your dedication to this project and for sharing your talent.
Without you and the help of the entire Columbia University Press organiza-
tion, this book, as it is written, would not have been possible.
Very important, I would like to acknowledge my current colleagues
at Shareholder Value Management AG in Frankfurt, Germany for the
critical role that they have individually played. Thank you, Frank Fischer
and Reiner Sachs, for creating an organization that has provided me with
both an amazing environment and the freedom to continually improve my
understanding of value investing, without which I could not have written
this book. You are, honestly, each in your own way, two of the most incred-
ible and positive individuals I have ever had the opportunity to work with.
I am especially thankful for the very significant time that you, Frank, have
spent sharing with me your lessons learned in investing and many other