200 AFTERWORD
The message we received throughout the f irst day was both consis-
tent and logical. We spent the afternoon analyzing Value Line research
reports and learning to distinguish between stocks that were down in
price and appeared to be cheap and stocks that were up in price and ap-
peared to be expensive. By the end of our f irst training session, we all be-
lieved we were in possession of the Holy Grail of investing. As we packed
up our belongings, our instructor reminded us to take the Berkshire
Hathaway annual report with us and read it before tomorrow’s class.
“Warren Buffett,” she cheerily reminded us, “was Benjamin Graham’s
most famous student, you know.”
Back in my hotel room that night, I was wrung out with exhaus-
tion. My eyes were blurry and tired, and my head was swimming with
balance sheets, income statements, and accounting ratios. Quite hon-
estly, the last thing I wanted to do was to spend another hour or so read-
ing an annual report. I was sure if one more investing factoid reached my
inner skull, it would certainly explode. Reluctantly and very tiredly, I
picked up the Berkshire Hathaway report.
It began with a salutation To the Shareholders of Berkshire Hath-
away Inc. Here Buffett outlined the company’s major business princi-
ples: “Our long-term economic goal is to maximize the average annual
rate of gain in intrinsic value on a per share basis,” he wrote. “Our pref-
erence would be to reach this goal by directly owning a diversif ied group
of businesses that generate cash and consistently earn above-average re-
turns on capital.” He promised, “We will be candid in our reporting to
you, emphasizing the pluses and minuses important in appraising business
value. Our guideline is to tell you the business facts that we would want
to know if our positions were reversed.”
The next fourteen pages outlined Berkshire’s major business holdings
including Nebraska Furniture Mart, Buffalo Evening News,See’s Candy
Shops, and the Government Employees Insurance Company. And true to
his word, Buffett proceeded to tell me everything I would want to know
about the economics of these businesses, and more. He listed the common
stocks held in Berkshire’s insurance portfolio, including Aff iliated Publi-
cations, General Foods, Ogilvy & Mather, R.J. Reynolds Industries, and
the Washington Post. I was immediately struck by how seamlessly
Buffett moved back and forth between describing the stocks in the port-
folio and the business attributes of Berkshire’s major holdings. It was as if
the analyses of stocks and of businesses were one and the same.