Glen Arnold, a former academic (professor of investment and professor of corporate finance) turned more or less fulltime investor as well as a prolific author of books on finance, is an unabashed fan of Warren Buffett. He is a Berkshire Hathaway (NYSE:BRKa) shareholder and regularly travels from England to Omaha for the Berkshire annual meetings.
Arnold set out to discover why Buffett chose the companies he invested in and what lessons individual investors can learn from Buffett’s decisions. Volume 1 of The Deals of Warren Buffett (Harriman House, 2017) covers the period leading to Buffett’s first $100 million in net worth, which he reached in 1978 at the age of 48.
Contrary to myth, Buffett didn’t always have a Midas touch. Apart from his most notable failure, Berkshire Hathaway the textile company, he lost money when he was in his early 20s on Cleveland Worsted Mills and an Omaha gas station he bought together with a friend.
But many of his investments were staggeringly successful, certainly dwarfing the $2,000 he lost on the gas station. Arnold goes through Buffett’s early investments one by one, from lesser known companies such as Rockwood & Co., Sanborn Maps, Dempster Mill, Hochschild-Kohn, and Associated Cotton Shops to such Berkshire staples as American Express (NYSE:AXP), Walt Disney Company (NYSE:DIS), See’s Candies, and the Washington Post.
Throughout, Arnold stresses Buffett’s investing principles, exemplified in each of these deals, that can withstand the test of time. Among them: Grand principles are more important than a grand plan. Market moods can be incomprehensible to value investors, but stick with sound investing principles in good times and bad. And, re managers, good jockeys will do well on good horses, but not on broken-down nags. And so, in general it’s important to avoid businesses with problems.
Buffett followers will welcome this addition to the already huge Buffett bibliography. Arnold’s book will be even more illuminating to investors who are in search of an overarching rationale for their investing decisions. Why not learn from the best?