Warren Buffett's annual letters: The Essays of Warren Buffett by Lawrence A Cunningham

2 Jun 2022

Hi, When it comes to successful people investing in the stock market, the name of Warren Buffet is definitely taken.

Warren Buffet, from whose life we can learn a lot Be it investing at a young age or holding for the long term, Warren Buffet lives up to the definition in all.

Top 5 Learning from the famous book "The Essays of Warren Buffett: Lessons for Corporate America". The author of the book is - Lawrence A. Cunningham.

In reality, the book is a collection of all the annual letters by Warren Buffett to Berkshire Hathaway shareholders from 1979 to 2006. Author Cunningham presents those letters of Warren Buffet in an organized manner in this book.

Top 5 learnings of the book

The first learning of the book is that we should not take our investment decisions based on the market's short-term movements or fluctuations.
As Benjamin Graham said - "In the short run, a market is a voting machine, but in the long run, it is a weighing machine".

Warren Buffett also strongly supports the concept. Their advice to be successful in the stock market is to ignore short-term price fluctuations and invest in good businesses for the long term.

It is also said that whenever they analyze a company, he doesn’t pay attention to the company's daily or weekly price fluctuations Focus on its operating results and take decisions from that.

As the second learning of this book, we will learn how Warren Buffet himself analyzes business before investing. Warren Buffett has said in the book that he and his business partner Charlie Munger considered 4 points before investing in any business-

First of all, they choose such companies whose business model they understand well.

Then they look for companies among them that may have good long-term growth prospects.

Third, they look for companies whose management is honest & transparent. The company's management is capable of growing it.

Lastly, after looking at all these factors, they check their valuations before buying a stock and make sure that it is available at a fair price.

In the third lesson of this book, we will see the opinions of Warren Buffet on Value investing and growth investing. As per Warren Buffett, many investors consider growth investing and value investing to be opposites, but they are not opposites.

But these two are fundamentally related to each other. Whenever you analyze a business, you should look at its overall value that considers both stock price or valuation and earnings growth.

Therefore, in investment, value and growth should never be viewed differently. Also, if the company's earnings and profit growth are low, then no matter how good the valuation is, you should avoid such companies.

In the 4th learning of the book, we will discuss how an individual should invest as per Warren Buffet.

So Warren Buffett has said that if you do not understand much about finance, then you do not need to be an expert to analyze every company. You should only focus on those companies that fall in your “Circle of Competence”.

Those businesses that you understand well. You can consider investing in the businesses you understand well and whose earnings might grow more in 5, 10, or 15 years. But also if the stock is available at a fair price.

The 5th learning is that whenever it comes to stock price and quality of business, we should give more preference to the quality of business. Warren Buffet says – “It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price”.

That is, they mean to say that we should never invest in such stocks in the greed of low prices, while their business is not strong. If there is a stock whose business is strong then if you get such stock at a slightly high price then you can think of investing in it.

Here are the top 5 teachings of the book. Which of these points did you like the most, do let us know your comments.

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