We Study Billionaires - The Investor’s Podcast Network

TIP521: Warren Buffett's Shareholder Letters

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Feb 7, 2023

Dive into the wisdom of Warren Buffett as his shareholder letters are unpacked like a value investing MBA. Discover the essentials of what makes Berkshire's 'Big Four' businesses tick. Learn why Buffett champions share repurchases and treats shareholders like partners. Explore the pitfalls of investing in volatile industries and get insight into Buffett's capital allocation strategies. Finally, understand his principles for selecting reliable successors and the importance of intrinsic value in fostering long-term success.

56:23

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ADVICE

Investment Selection Criteria

Look for businesses you understand with favorable long-term prospects.
Seek companies operated by honest and competent people at attractive prices.

insights

INSIGHT

Buffett's Communication Style

Warren Buffett's investment approach emphasizes honesty and straightforwardness.
He prioritizes clear communication with shareholders about business performance.

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ADVICE

Manager Selection and Incentives

Prioritize selecting honest and diligent managers who act with integrity.
Align management and shareholder interests; incentivize improving real returns on capital.

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Wisdom from Buffett's Letters

04:20 • 10min

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Understanding Stock Options and Managerial Risks

14:43 • 3min

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Buffett's Trust and Investment Philosophy

18:02 • 18min

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Investing Beyond Market Noise

36:31 • 4min

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Warren Buffett's Investment Wisdom

40:47 • 9min

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Buffett's Wisdom on Credit and Leadership

49:43 • 10min

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Influence

The Psychology of Persuasion

Robert Cialdini

In this highly acclaimed book, Dr. Robert B. Cialdini explains the psychology behind why people say yes and how to apply these insights ethically. The book outlines six universal principles of influence: Reciprocation, Commitment and Consistency, Social Proof, Liking, Authority, and Scarcity. The new and expanded edition includes a seventh principle, Unity, along with new research, insights, and examples. Cialdini uses memorable stories and relatable examples to make the subject accessible and easy to understand, helping readers become more skilled persuaders and defend themselves against unethical influence attempts.

The essays of Warren Buffett

Lessons for Corporate America

Warren Buffett

This book is a comprehensive collection of Warren Buffett's annual letters to Berkshire Hathaway shareholders, edited by Lawrence A. Cunningham. It provides valuable insights into Buffett's investment philosophy, corporate management, and business strategies. The letters are organized into thematic chapters, making it easier for readers to understand Buffett's views on various topics such as value investing, executive compensation, and market fluctuations. The book is praised for its clarity, wisdom, and practical advice, making it a definitive source for understanding Buffett's approach to business and investing.

The education of a value investor

Guy Spier

In this book, Guy Spier narrates his early career struggles in investment banking on Wall Street and his transformation into a value investor. The book covers his experiences working at D.H. Blair, his education at Oxford and Harvard Business School, and the significant influences of Warren Buffett and Charlie Munger on his investment philosophy. It also emphasizes the importance of authenticity, continuous learning, and ethical considerations in investing. The book has been translated into several languages and has sold over 175,000 copies in English.

On today’s episode, Clay reviews Warren Buffett’s shareholder letters and shares his takeaways, and distills some of the biggest lessons he learned. If you asked a lot of value investors, they would tell you that reading Buffett’s letters is equivalent to an MBA on value investing and business. Buffett has a lot to teach us as investors as he has grown the value of Berkshire shares by over 3,600,000% since he took control of the business in 1965.

IN THIS EPISODE YOU’LL LEARN:

00:00 - Intro

07:44 - What Berkshire’s “Big Four” businesses are.

13:16 - What Buffett looks for when investing in a business and what he looks for in a management team.

14:19 - Why Buffett loves share repurchases and why they give me further vindication that a stock is cheap.

18:28 - Why it pays to treat your colleagues and shareholders like partners.

24:49 - Why industries with constant change should be avoided by investors.

28:36 - How Buffett views cash and leverage in his capital allocation strategy.

49:28 - What Buffett looks for when selecting him and Charlie’s successors.

Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.

BOOKS AND RESOURCES

Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Stig, Clay, and the other community members.
The Essays of Warren Buffett by Lawrence Cunningham.
Listen to Clay’s review of The Education of a Value Investor by Guy Spier, or watch the video.
Tune into the recent We Study Billionaires’ episode covering The Dhandho Investor by Mohnish Pabrai, or watch the video.
Learn more about our free social events in Omaha here.
Follow Clay on Twitter.

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