A Quick Review of Buffett's Early Investments

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I bought Buffett’s Early Investments last Sunday and finished it the following Monday morning.

The book shows how, in his early years, Buffett often bought closely held stocks, with limited float, in industries where the short-term outlook was anything but rosy.

Partly because of all that, he was able to buy them cheaply.

A typical stock he bought, for example, would sell for 3 to 5 times earnings, offer a dividend yield around 7%, and have a margin of safety backed by the cash, inventories, and land that it sold at a discount to.

In determining the value, Buffett didn’t rely on income statements and balance sheets alone. He:

• counted railcars near factories,

• talked with a wide range of customers,

• met with the company’s management, and

• hired others to do the same.

In realizing the value of the company, Buffett was similarly pro-active—most notably in arguing for and often getting management to change how they allocated capital.

The thing that stuck out for me the most, however, and which the author, Brett Gardner, repeatedly observes, is that Buffett didn’t “box himself in with strict criteria.”

Rather, “he was light on his feet, opportunistically pouncing on value wherever he could find it.”

This included buying Disney stock, where the margin of safety was in old movies that could be rereleased as opposed to in cash and marketable securities or in inventories.

There are other such examples in the book, however, and it’s a book you should definitely check out!

I actually read someone else say that it’s good to read even if you’ve already read the other books on Buffett.

The only thing I’d disagree with that is the word “even.”

I think Buffett’s Early Investments is well-worth reading especially if you’ve read those other books.

After all, it shows a part of Buffett that they rarely focus on, and in doing so allows you to see that he wasn’t born a great investor, he instead became one through careful study, gumshoe research, and concentrated investments.

But perhaps I’m preaching to the choir on this one, as I wasn’t the first to read it, and only decided to do so after seeing more and more positive mentions of it online.

Have you read it yet?

If you have, let me know what you think about it and, if not, what are you reading?

I’m in the market for another good book on business or investing and would appreciate any recommendations.