A gold mine of investing advice from the most successful investor in history
THE ESSAYS OF
Warren Buffett
SIXTH EDITION
When Warren Buffett speaks, people worldwide listen. And with good reason: Buffett is the most successful investor-manager in history. He has set world records for achieving both high personal net worth, exceeding US$80 billion, and high corporate value for his holding company, Berkshire Hathaway, approaching US$600 billion. Time magazine lists Buffett as among the most influential people in the world - and he is.
According to Buffett, the best book collating his philosophy is The Essays of Warren Buffett by Lawrence A. Cunningham, the internationally renowned scholar and expert on Buffett and Berkshire. Through many updated editions dating to 1997, The Essays is the definitive account of Buffett’s approach to investing and management, consisting of a carefully curated and thematically organized compendium of Buffett’s original annual letters, along with Cunningham’s priceless commentaries.
"The book on Buffett. A superb job."
- Forbes
"Extraordinary."
- Money
"A classic on value investing and the definitive source on Buffett."
- Financial Times
One of "the smartest books we know."
- Fortune
Table of Contents
Editor’s Note xi
Introduction xiii
Governance xvi
Investing xx
Alternatives xxvi
Common Stock xxviii
Acquisitions xxxi
Valuation xxxiii
Accounting xxxvi
Taxation xxxvii
History xxxviii
Coda xxxviii
Prologue: Owner-Related Business Principles xli
I. Governance 1
A. Full and Fair Disclosure 2
B. Boards and Managers 5
C. The Anxieties of Business Change 17
D. Social Compacts 24
E. An Owner-Based Approach to Corporate Charity 26
F. A Principled Approach to Executive Pay 32
G. Risk, Reputation and Climate Change 42
H. Corporate Culture 45
II. Investing 47
A. Farms, Real Estate and Stock 48
B. Mr. Market 52
C. Arbitrage 56
D. Debunking Standard Dogma 62
E. “Value” Investing: A Redundancy 71
F. Intelligent Investing 78
G. Cigar Butts and the Institutional Imperative 84
H. Life, Debt and Swoons 88
III. Alternatives 93
A. Surveying the Field 94
B. Junk Bonds and the Dagger Thesis 98
C. Zero-Coupon Bonds and Ski Masks 105
D. Preferred Stock 111
E. Derivatives 122
F. Foreign Currencies and Equities 131
G. Home Ownership: Practice and Policy 137
H. Business Partnerships 140
IV. Common Stock 145
A. Beating Costs with Indexing 146
B. Attracting Quality Shareholders 154
C. Stock Splits and the Invisible Foot 157
D. Berkshire’s Dual Class: Thwarting Clones 162
E. Buybacks and Rationality 166
F. Dividends and Capital Allocation 173
V. Acquisitions 183
A. Bad Motives and High Prices 184
B. Sensible Share Repurchases Versus Greenmail 195
C. Leveraged Buyouts 195
D. Sound Acquisition Policies 198
E. On Selling One’s Business 201
F. The Buyer of Choice 205
VI. Valuation 209
A. Aesop and Inefficient Bush Theory 210
B. Intrinsic Value, Book Value, and Market Price 213
C. Look-Through Earnings 220
D. Economic versus Accounting Goodwill 225
E. Owner Earnings and the Cash Flow Fallacy 235
F. Option Valuation 242
VII. Accounting 247
A. Satire 248
B. Standard Setting 255
C. Audit Committees 256
D. Adjusted Earnings 258
E. Pension Estimates and Retiree Benefits 266
F. Realization Events 269
G. Investments 270
VIII. Taxation 273
A. Distribution of the Corporate Tax Burden 274
B. Taxation and Investment Philosophy 277
IX. History 281
A. The American Miracle 282
B. Productivity Growth 284
C. Tailwinds 289
X. Coda 293
A. Buffett on Berkshire Culture 293
B. Munger on “The Berkshire System” 306
C. Methuselah’s Estate 312
Concept Glossary 315
Disposition Summary 317
Index 319
