48 The Business of Value Investingadditional value to the investment analysis. After the fi rst several
major pieces of data, any additional variables offer very little signifi -
cant value to the analysis.
Consider Buffett ’ s 1973 investment in the Washington Post
Company. An often cited example by value investors, the invest-
ment illustrates the elegance of a straightforward, businesslike
approach to investing. In a 1984 speech at Columbia University,
Buffett discussed his attraction to the company: “ The Washington
Post Company in 1973 was selling for $ 80 million... at the time,
you could have sold the assets to any one of ten buyers for not less
than $ 400 million. ”^1
While Buffett had been keenly familiar with the operations of the
Post Company through his friendship with Post publisher Katherine
Graham, he made his ultimate investment decision based on facts,
not hundreds of bits of information about newspaper subscriptions,
advertising revenue, and so on. He determined that you could buy
approximately $ 1 worth of assets for 20 cents and that, over time, that
was a very good bet to make. Any time you can buy $1 worth of assets
for substantially less, it’s generally a good bet to make.
I discussed in Chapter 1 why approaching any particu-
lar investment as if purchasing an actual piece of a business as
opposed to a share of stock leads to a more intelligent invest-
ment process. Attempting to invest in stocks or any other security
without fi rst defi ning and understanding the reasoning behind
your investment considerations is like jumping into the ocean
without fi rst having learned to swim in a pool. Likely you will suc-
cumb to emotion and fear at the slightest sign of troubles, and
your chances of long - term survival are slim. Most, if not all, of
your market activities would be speculative but mistaken for an
investment operation because no fundamental intellectual frame-
work exists behind the decision - making process. This chapter lays
out the foundation of value investing, which is to have a sound
investment philosophy. Successful value investing does not rely onCH004.indd 48CH004.indd 48 9/2/09 7:06:49 PM9/2/09 7:06:49 PM