Book Review: Buffett Beyond Value

Another Buffett book?  Why do we need another Buffett book?

We need another Buffett book because Buffett is a complex guy, and not easily corralled into simple explanations that he himself does not provide.  This book attempts to explain Buffett as a growth investor, rather than a value investor.

This distinction is important.  Value investors cling to Buffett because of his success and his pedigree.  He is the leading successor to Ben Graham, and arguably, the man who protects Graham’s reputation.  He is an able proponent of value investing, the best example of that being his Appendix to “The Intelligent Investor,” called “The Superinvestors of Graham-and-Doddsville.”  There he argues that value investing is superior to other forms of investing — look at the excellent results of these =great value investors.

Now, I rejected the logic of the argument, because anyone can pick and choose a bunch of good investors with the same strategy, the same as Michael Covel did when He wrote “Trend Following.” Merely because you have found a bunch of successful investors with the same strategy does not mean that the strategy is itself successful.  There may be other factors in play.

Buffett the Growth Investor

What is neglected in understanding Buffett is his ability to analyze growth possibilities and the strength of management teams.  Once Buffett began to manage a lot of money, he realized that simple value investments would not be enough for him to buy, so he moved to [GARP] Growth at a Reasonable Price.  There is no surprise here.  There are a lot of investors scouring the markets for cheap deals, but those are typically small and unknown.  Big investors have to aim for larger companies that offer growth at a reasonable price.

The author understands the basics of Buffett:

  • Buffett is value plus growth.
  • Buffett makes money off of clever insurance underwriting.
  • Buffett makes money off of dull businesses that earn more than their cost of capital, like utilities and railroads.
  • Why holding cash is reasonable.
  • How Buffett views accounting issues, investor psychology, and market efficiency.
  • How Buffett views corporate governance.

Quibbles

The book reads more like the author’s view of how the world should be, while appealing to Buffett as a support for his observations.  Be that as it may, it is a book that I would moderately recommend.

If you want to buy the book, you can buy it here:  Buffett Beyond Value: Why Warren Buffett Looks to Growth and Management When Investing

Who would benefit from this book

It is a good overall book.  If you haven’t read a Buffett book, read this.  If you only understand Buffett to be a value investor, then read this book.

Full disclosure: I said I would review the book, and his publisher sent me a copy for free.

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