The Warren Buffett Way

Warren Buffett is the most famous investor of all time and one of today s most admired business leaders. He became a billionaire and investment sage by looking at companies as businesses rather than prices on a stock screen. The first two editions of The Warren Buffett Way gave investors their first in-depth look at the innovative investment and business strategies behind Buffett's spectacular success. The new edition updates readers on the latest investments by Buffett. And, more importantly, it draws on the new field of behavioral finance to explain how investors can overcome the common obstacles that prevent them from investing like Buffett. New material includes: How to think like a long-term investor just like Buffett Why "e;loss aversion"e;, the tendency of most investors to overweight the pain of losing money, is one of the biggest obstacles that investors must overcome. Why behaving rationally in the face of the ups and downs of the market has been the key to Buffett's investing success Analysis of Buffett's recent acquisition of H.J. Heinz and his investment in IBM stock The greatest challenge to emulating Buffett is not in the selection of the right stocks, Hagstrom writes, but in having the fortitude to stick with sound investments in the face of economic and market uncertainty. The new edition explains the psychological foundations of Buffett's approach, thus giving readers the best roadmap yet for mastering both the principles and behaviors that have made Buffett the greatest investor of our generation.

Warren Buffett is the most famous investor of all time and one of today's most admired business leaders. He became a billionaire and investment sage by looking at companies as businesses rather than prices on a stock screen. The first two editions of The Warren Buffett Way gave investors their first in-depth look at the innovative investment and business strategies behind Buffett's spectacular success. The new edition updates readers on the latest investments by Buffett. And, more importantly, it draws on the new field of behavioral finance to explain how investors can overcome the common obstacles that prevent them from investing like Buffett.New material includes:* How to think like a long-term investor - just like Buffett* Why "loss aversion", the tendency of most investors to overweight the pain of losing money, is one of the biggest obstacles that investors must overcome.* Why behaving rationally in the face of the ups and downs of the market has been the key to Buffett's investing success* Analysis of Buffett's recent acquisition of H.J. Heinz and his investment in IBM stockThe greatest challenge to emulating Buffett is not in the selection of the right stocks, Hagstrom writes, but in having the fortitude to stick with sound investments in the face of economic and market uncertainty. The new edition explains the psychological foundations of Buffett's approach, thus giving readers the best roadmap yet for mastering both the principles and behaviors that have made Buffett the greatest investor of our generation.

Foreword: The Exception viiHoward MarksForeword to the Second Edition xviiBill MillerForeword to the First Edition xixPeter S. LynchIntroduction xxvKenneth L. FisherPreface xxxiChapter One A Five-Sigma Event: The World'sGreatest Investor 1Personal History and Investment Beginnings 3The Buffett Partnership Ltd. 10Berkshire Hathaway 13Insurance Operations 15The Man and His Company 17Five-Sigma Event 18Chapter Two The Education of Warren Buffett 21Benjamin Graham 21Philip Fisher 30Charlie Munger 35A Blending of Intellectual Influences 38Chapter Three Buying a Business: The Twelve Immutable Tenets 45Business Tenets 46Management Tenets 50Financial Tenets 59Market Tenets 64Anatomy of a Long-Term Stock Price 69Chapter Four Common Stock Purchases: Nine Case Studies 71The Washington Post Company 72GEICO Corporation 81Capital Cities/ABC 91The Coca-Cola Company 100General Dynamics 110Wells Fargo & Company 114American Express Company 120International Business Machines 123H.J. Heinz Company 130A Common Theme 135Chapter Five Portfolio Management: The Mathematics of Investing 137The Mathematics of Focus Investing 143Focus Investors in Graham-and-Doddsville 155Chapter Six The Psychology of Investing 179The Intersection of Psychology and Economics 180Behavioral Finance 182And on the Other Side, Warren Buffett 194Why Psychology Matters 199Chapter Seven The Value of Patience 201For the Long Term 202Rationality: The Critical Difference 205Slow-Moving Ideas 206System 1 and System 2 207The Mindware Gap 210Time and Patience 211Chapter Eight The World's Greatest Investor 213The Private Buffett 216The Buffett Advantage 218Learning to Think Like Buffett 224Finding Your Own Way 232Appendix 235Notes 253Acknowledgments 263About the Author 267Index 269