Buffett Letter: 1964 semi-annual 1

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1964

Semi-annual 1
  • Mr Buffett re-emphasizes the point on maintaining an edge over the index. He says if we can maintain this edge over a long period  of time the results will be satisfactory both financially as well as philosophically.
  • Views on diversification: I've never gone overboard for Noah's ideas on diversification either. I slightly differ on this. I feel a certain level of diversification is absolutely necessary when the definite edge is not known. There is a probability associated to every trade and if that is low there is no point betting the house on it. That is being plain stupid. Mr Buffett being a genius in this domain would know his odds very well in such trades.
  • He reiterates all that he has said on his 3 classes of investing strategies - the generals, the workouts, the controls.
  • Skin in the game is extremely essential in money management I believe. Mr Buffett Says - I can't promise results but I can promise a common destiny
  • He adds a new case study - The Texas National Petroleum which is a workout situation. Key pointers are that he doesn't go by rumours even if they later turn out to be true. Second he is looking for a definite result in this part of his portfolio.
  • He also says that using leverage is perfectly fine in workouts but is dangerous for the generals. I agree with him.
  • The second case is something which he has mentioned earlier - Dempster Mill. The emphasis is on capital allocation done by the new manager. Mr Buffett loves good capital allocators.

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