Life&StylesofWarrenBuffetTaroAokiJenniferLiuNiravModyFezQamarRyanVaughn第一頁(yè)，共四十頁(yè)。AgendaBackgroundQualitativeAnalysisQuantitativeAnalysisMcDonald’sAnalysisConclusion第二頁(yè)，共四十頁(yè)。AnExceptionalChildSold6-packsofCokeforaprofitBoughthisfirstsharesatageelevenGraduatedfromcollegein3yearswhileworkingfulltimeOnlystudentatColumbiatoreceiveanA+inoneofBenjaminGraham’sclasses第三頁(yè)，共四十頁(yè)。AGreatBusinessmanThesecondrichestmanintheworldwith$20billionTurned$105,000into$300,000inoneyearandreturned1,156%onthesameportfolioafter10yearsDirectorofBerkshireHathawaywhichhashadstockhighsof$80,000第四頁(yè)，共四十頁(yè)。AGreatBusinessman(cont.)WasnamedCEOofSalomonBrothersinonedaytosolvebonddebaclePersonalinvestmentmovesaremimickedbythemarket第五頁(yè)，共四十頁(yè)。TenetsoftheOracleofOmahaMarginalgainsareastupidreasontoholdstock“Lethargy,borderingonsloth,shouldremainthecornerstoneofaninvestmentstyle”“Neverinvestinabusinessyoucannotunderstand”第六頁(yè)，共四十頁(yè)。InvestingisBusiness-LikeDoesnotbelieveintheEfficientMarketsHypothesisBelievesdiversificationisforidiotsDoesnotcareaboutmarketfluctuationsThinksinvestingisonlycorrectwhenitisbusiness-like第七頁(yè)，共四十頁(yè)。QualitativeAnalysis第八頁(yè)，共四十頁(yè)。InvestingFromaBusinessPerspectiveLookattheeconomicownershipofbusinessesthecommonstockrepresentsNotahorseracewithnumbersfoundeverymorningontheWallStreetJournal第九頁(yè)，共四十頁(yè)。WarrenLooksat…TheannualEPSfigureItspredictabilityThemarketprice第十頁(yè)，共四十頁(yè)。WallStreetLooksat…TheyworkforacommissionInterestedinsellingthepriciestsecuritytheycanfindDonotcareaboutthepriceatwhichtheysellyouthestock,soNObargains第十一頁(yè)，共四十頁(yè)。EarningsGivebackinformofdividends(-)Subjecttocapitalgainstax(-)CannotreinvestaswellRetainEarnings(+)Canreinvestbetter(+)Increasesvalueofstockprice第十二頁(yè)，共四十頁(yè)。TheCompoundingRateofReturnWarren’srealtrickistogetahighannualcompoundingrateofreturn5%10%15%20%10yrs

$162,889$259,374$404,555$619,17320yrs

$265,329$672,749$1,636,653$3,833,75930yrs

$432,194$1,744,940$6,621,177$23,737,631第十三頁(yè)，共四十頁(yè)。PhilosophiesWarrenadoptedFisherandMunger’sphilosophiesSuperioreconomicsworkingintheirfavorSellingatthe“right”priceWarrendidNOTadoptGraham’sphilosophySellingata“bargain”price第十四頁(yè)，共四十頁(yè)。Warren’sInvestingBeliefsConsumermonopoly,withexceptionalbusinesseconomics,andshareholder-orientedmanagementBasesinvestmentdecisionson8keyquestions第十五頁(yè)，共四十頁(yè)。8KeyQuestionstoInvestingDoesthebusinesshaveanidentifiableconsumermonopoly?Aretheearningsofthecompanystrongandshowinganupwardtrend?Isthecompanyconservativelyfinanced?Doesthebusinessconsistentlyearnahighrateofreturnonshareholdersequity?第十六頁(yè)，共四十頁(yè)。(cont.)Doesthebusinessretainitsearnings?Howmuchmoneydoesthebusinesshavetospendonmaintainingthecurrentoperations?Howgoodisthemanagementatreinvestingretainedearnings,earningsinbusinessopportunitiesandexpansionofoperations?Isthecompanyfreetoadjustpricestoinflation?第十七頁(yè)，共四十頁(yè)。WhenToBuyBusinessesattheirworstBusinesseswithexcellentmanagementwillsurviverecessionsandlikelycomeoutofitinabetterpositionStockmarketcancreatesituationsthatwhipsawsecuritypricesregardlessoftheunderlyingeconomicsofthebusiness.第十八頁(yè)，共四十頁(yè)。WhentoSellGraham’sApproachSellwhensecurityreachesintrinsicvalue

WarrensApproachHoldontostockaslongaspossible Possibleonlywheninvestinginexcellentbusiness.第十九頁(yè)，共四十頁(yè)。QuantitativeAnalysis第二十頁(yè)，共四十頁(yè)。ThreeInitialTestsTest#1:PredictabilityofEarningsIsthecompanystrong?Doesthecompany’sEPShaveanupwardtrend?Test#2:InitialRateofReturnInitialRateofReturn=EPS/sharepriceTest#3:PerShareGrowthRateUsePV/FVFormulaFV=PV(1+r)T第二十一頁(yè)，共四十頁(yè)。GrowthofRetainedEarnings

EPSStockPriceEarningsareeitherretainedorpaidasdividendsRetainedEarningsgrowatthesamerateasROECompoundingeffectstakesplacewhentheyearsofholdingincreaseInitialRateofReturn=第二十二頁(yè)，共四十頁(yè)。AnnualCompoundingRateofReturnProjectFutureEPSPVformulaProjecttheMarketPriceMarketPrice=P/ERatio*EPSProjecttheAnnualCompoundingRateofReturnPV/FVFormula第二十三頁(yè)，共四十頁(yè)。IncreasingShareholderValueStockRepurchasesDecreases#ofsharesoutstandingIncreasesEPSIncreaseinsharepriceInvestorreceiveshighreturn第二十四頁(yè)，共四十頁(yè)。HighRatesofReturnonEquityBuffettviewssomestocksasequity/bondbecauseofvariableratesofreturnHighROEEPSwillincreasefasterandatahigherrateRatesofreturncompetewiththerateofreturnpaidongovernmentbonds第二十五頁(yè)，共四十頁(yè)。ValuingRelativetoGovernmentBonds

CurrentpershareearningsRateofreturnforgovernmentbondsDeterminestheintrinsicvalueofthecompanyComparethispricewiththemarketpricePrice=第二十六頁(yè)，共四十頁(yè)。Short-TermArbitrageOpportunitiesOpportunitiesthatariseuponthemergersoracquisitionsoffirmsProfitisdeterminedbythepricespreadAnnualReturn=CG–L(100%-C)/YPC=expectedchanceofsuccess(%)G=expectedgainintheeventofsuccessL=expectedlossintheeventoffailureY=expectedtimeofholding(years)P=currentpriceofthesecurity第二十七頁(yè)，共四十頁(yè)。Let’sbegintheBuffetAnalysis!DoresearchandgatherannualreportonMcDonald’sCorporationDoesMcDonald’shaveanyidentifiableconsumermonopolyordotheysellacommodity-typeproduct?Isthecompanyconservativelyfinanced?LongTermDebtTotalLiabilities+Shareholder’sEquity=37%第二十八頁(yè)，共四十頁(yè)。BuffettologyAretheearningsofthecompanystrong,anddotheyshowanupwardtrend?HowdoesMcDonald’sallocatecapital?DoesMcDonald’smakebuybacks?YearEarnings1986$0.621987$0.721988$0.861989$0.981990$1.101991$1.181992$1.301993$1.451994$1.681995$1.971996$2.21第二十九頁(yè)，共四十頁(yè)。MoreBuffettologyDoesMcDonald’sincreaseshareholderearnings?13.8%rateofreturn$10.001986shareprice$47.00in1996Howisthecompany’sreturnonequity?Isthecompanyfreetoadjustpricestoinflation?YearROE198619.1%198718.8%198818.9%198920.5%199019.2%199117.8%199216.0%199317.3%199417.8%199518.2%199618.0%第三十頁(yè)，共四十頁(yè)。PriceAnalysisInitialRateofReturnandRelativeValuetoGovernmentBondsGovernmentbondw/staticrateofreturn:7%McDonald’sequityw/initialrateofreturn:5.2%increasingatanannualrateof13.5%McDonald’sStockasanEquity/BondAnnualcompoundingrateofreturn:14.6%ProjectAnnualCompoundingRateofReturnUsingHistoricalAnnualEPSGrowthFigureAnnualcompoundingrateofreturn:12.6%第三十一頁(yè)，共四十頁(yè)。AnEccentricManEatsthesamemealeverydayDrivesaVWBeetleHasalive-ingirlfriendwhowasintroducedtoWarrenbyhiswife第三十二頁(yè)，共四十頁(yè)。Questions?第三十三頁(yè)，共四十頁(yè)。第三十四頁(yè)，共四十頁(yè)。SomeexamplesTheWashingtonPostisagoodexampleofthis.Warrenbought1,727,765sharesin1973for$9,731,000andstillhasitwithhim.Todayitisworth$600million,givinghimacompoundingreturnofabout18.7%.GEICOisanotherexampleofthis.Hebought$45,713,000worthofsharesin1972.In1995,itwasworth$1,759,594,000givinghimacompoundingrateof17.2%.第三十五頁(yè)，共四十頁(yè)。WhatdoesitmeanWarrensaidthatifGrahambelievedthesharewasworth$62.50butwassellingat$50thenthestockwasundervaluedby$12.50.IfGrahaminvestedinthecompanyat$50andthestockroseto$62.50thenhewouldmake25%returnonhisinvestmentonthefirstyear.Butifitdroppedthenhewouldlosemoney.Thusifitkeepsdropping,thenhelosesmoneyandhasnoreturns.ThisistherealizationofthevalueproblemthatWarrensawanddecidedtoadopttheprinciplesofPhilipFisherandCharlesMunger.WarrenfeltthatthemethodsofGrahamlackeduncertaintyandheheldholdingsthatneverperformed.第三十六頁(yè)，共四十頁(yè)。ThreeExcellentBusinessesBusiness1Businessesthatmakeproductsthatwearoutfastorareusedupquickly,thathavebrandappeal,andthatmerchantshavetocarryorusetostayinbusinessSomeexamplesthatWarrensaysareperfectareCoca-Cola,HersheyFoodschocolate,Wrigleygum,andDoritos.Thesecompaniesnodoubtareexcellentbusinessesbecausealmosteveryconvenientstorehastheseproducts.ForclothingFruitoftheLoom,Nike,HanesandLevi’sareallgood.第三十七頁(yè)，共四十頁(yè)。Business2CommunicationsbusinessesthatprovidearepetitiveservicemanufacturersmustusetopersuadethepublictobuytheirproductsWarreninitiallyinvestedagreat