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More about “Buffett Beyond Value”

April 28th, 2010

Buffett Beyond ValueMore from Georgetown University McDonough School of Business author Prem Jain:

Most authors describe Warren Buffett as a value investor alone in the tradition of his professor and mentor Benjamin Graham. The most important part of the book is in my argument that Warren Buffett is not a pure value investor. Buffett has incorporated ideas from others as well, especially from Philip Fisher. In other words, he does not emphasize historical numbers alone as Benjamin Graham did. He combines value investing with growth investing in the sense that he invests only when he is comfortable about a company’s growth prospects for a long term, say for 10 years or more. So, he looks at the future carefully.

This is the reason I label chapter 6 as “Buffett Investing = Value + Growth.” Prior to this chapter, I use one chapter each to explain value investing and growth investing. This thinking on investing for a very long term sets him apart from other growth investors who invest in high-tech companies for growth and hope to make a quick profit. Instead, Buffett invests in companies such as Coca-Cola and American Express which may grow more slowly, but for a very long term. He holds on to his investments for a long time, usually longer than 10 years.

Why is it that other managers think that investing in high-tech companies equals growth investing but Buffett does not? My conclusion is that he emphasizes the importance of managers who engender growth even in the so-called traditional low-growth industries. His success in long-term investing, especially for growth, can be attributed to people (rather than investing in high-tech companies) who manage his companies. Without doubt, he emphasizes the quality and integrity of people more than any other financial metric. Yet I do not stereotype Buffett as a particular type of investor, and I explain why it is important to consider a multidisciplinary approach by not forgetting the importance of other fields such as psychology.

In this environment, when Wall Street has been affected by many scandals, Buffett’s emphasis on slow and steady growth should be a good lesson for investors and CEOs.

Here are two links provided by Georgetown author Prem Jain.  The first is a review, and the second is a Q&A conducted by the same blogger, private investor and writer Ravi Nagarajan at Seeking Alpha.  Please also see the video from TheStreet.com in the post below.

http://seekingalpha.com/article/196893-prem-c-jain-makes-significant-contribution-to-crowded-field-of-buffett-books

http://seekingalpha.com/article/197799-interview-prem-jain-author-of-buffett-beyond-value-discusses-a-berkshire-without-buffett


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