Buffett Does It. Most Value Investors Don’t | Robert Hagstrom on the Real Key to Compounding

Jun 21, 2025

Robert Hagstrom, an investment manager and author renowned for his insights on Warren Buffett, discusses key misconceptions in value investing. He highlights the pitfalls of focusing too rigidly on low P/E ratios and traditional metrics, revealing how this leads to missed opportunities. Hagstrom shares lessons from his accidental journey into finance and the importance of adapting investment strategies. He also reflects on Buffett's leadership transition at Berkshire Hathaway and critiques the illusion of private equity's appeal in today’s market.

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ANECDOTE

Hagstrom's Accidental Career Start

Robert Hagstrom entered money management by accident after a brief journalism career.
Reading the 1983 Berkshire Hathaway letter inspired his investment approach modeling Warren Buffett.

INSIGHT

Avoid Absolution in Investing

Avoid being trapped by absolute investing beliefs as markets and strategies evolve.
Bill Miller taught Hagstrom to embrace what works and adapt pragmatically.

ADVICE

Efficient Book Reading Method

Use intelligent skimming to identify which books deserve deep reading.
Prioritize learning by synthesizing insights from multiple related books for efficiency.

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Making Sense of Chaos

A Better Economics for a Better World

J. Doyne Farmer

The Warren Buffett portfolio

Mastering the Power of the Focus Investment Strategy

Robert G Hagstrom

This book introduces the concept of focus investing, a strategy that has historically outperformed the market. Hagstrom explains how to build and manage a concentrated portfolio, similar to Warren Buffett's approach. He demonstrates how to select a few outstanding companies with high probability of continued strong performance and how to allocate investment funds proportionately. The book also delves into the intellectual framework for managing such a portfolio, including understanding price volatility, market psychology, and the importance of intellectual fortitude. It serves as a companion to Hagstrom's earlier work, 'The Warren Buffett Way', by providing tools for organizing and managing a focus portfolio.

Investing The Last Liberal Art

Robert G Hagstrom

In 'Investing: The Last Liberal Art', Robert G. Hagstrom delves into fundamental investing concepts by drawing from multiple fields outside of economics. Inspired by Charlie Munger's 'latticework of mental models', Hagstrom argues that good investment decisions cannot be made solely on finance theory. The book discusses how theories from physics, biology, sociology, psychology, philosophy, and literature can be applied to investing research. It also includes a new chapter on mathematics and updates reflecting the economic developments since 2008. The book emphasizes the importance of a broad education and critical thinking in investment performance[1][3][4].

The intelligent investor

Jason Zweig

Benjamin Graham

Written by Benjamin Graham, 'The Intelligent Investor' is a seminal work on value investing that has inspired millions since its original publication in 1949. The book emphasizes the importance of distinguishing between investing and speculation, calculating the intrinsic value of companies, and maintaining a margin of safety. The revised edition includes updated commentary by Jason Zweig, who provides modern examples and insights to help readers apply Graham's principles in today's market. Warren Buffett, a disciple of Graham, has praised the book as 'the best book about investing ever written'.

How to Read a Book

The Classic Guide to Intelligent Reading

Edward Holland

Mortimer J. Adler

Charles Lincoln Van Doren

Originally published in 1940 and revised in 1972, this book is a classic guide to intelligent reading. It describes the art of reading as the process by which a mind elevates itself through its own operations on the symbols of readable matter. The authors emphasize active reading, highlighting the importance of keen observation, available memory, range of imagination, and an intellect trained in analysis and reflection. The book provides practical lessons on how to read books effectively, including inspectional reading, analytical reading, and syntopical reading, to achieve a deeper understanding of the material.