University of Maryland Professor DaviD Kass recently met Warren Buffett together with 20 MBA students from 8 universities. The good professor provided a write-up for the 2-hour Q&A session on his blog. I found the following excerpt very interesting, but you are urged to check out the original:
(3) If you were to meet Benjamin Graham tomorrow, what would be your critiques, or what things did he get wrong?
WB: Read every book on investing in the library by the time he was 11 and bought his first stock. Read the Intelligent Investor in 1949 or 1950 when it was published. There is nothing in the book that needs to be changed. Its main principles are: (1) margin of safety, (2) buying dollar bills at a discount, and (3) awareness of the inability to predict the future. In 1970 or 1971 Benjamin Graham, who was ill, asked him to revise the book. He may have added something about inflation, but the fundamentals have remained the same for himself and Charlie (Munger).
(7) In the past you have said your investment philosophy was 85% Graham and 15% Fisher. Has that changed?
WB: Started out looking for cigar butts with one puff left. There were lots available in the 1950’s. That approach does not work well with large amounts of money to invest. His philosophy has shifted slightly more toward Fisher. Berkshire currently has $150 billion in cash and investments. He met Charlie Munger in 1959 who argued for investing in wonderful businesses and sit with them as they get better over time. In 1951 WB picked up the Moody’s Manual for that year and found Western Insurance selling at ½ times earnings. A few years ago someone sent him a book entitled “Korean Stock Market”. He found 15 – 20 stocks selling for 2X earnings. It was like the old days. He has also made mistakes such as his 1968 purchase of Blue Chip Trading Stamps whose sales have dropped from $120 million at its peak to $18,000. Dexter Shoe was another bad business that he bought. You need to get on an 80 mph train that is speeding up.
Buffett would not go into what stocks he was going to buy, but you can click on herer to check out what he had bought from quarter to quarter here at GuruFocus.
Read the full text.