Checklist: Tenets of the Warren Buffett Way

The “Tenets of the Warren Buffett Way” was examined in the book The Warren Buffett Way, written by Robert G. Hagstrom. The tenets also appear in Hagstrom’s other book The Warren Buffett Portfolio: Mastering the Power of the Focus Investment Strategy.

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This book has also been one of Charlie Munger’s book recommendations, see here.

In this book Roberth Hagstrom writes:

With The Warren Buffett Way, I hoped to describe and codify Warren Buffett’s style of investing, so that others might benefit from understanding his approach. In that earlier book I outlined the fundamental investment tools, or tenets, by which Buffett evaluates possible purchases. These tenets are summarized in Chapter 1, page 8.

The underlying principles haven’t changed much since The Warren Buffett Way was published, in 1994 (“That’s why they call them principles,” Buffett once said), but many readers have asked for clarification about applying the tenets in today’s market.

In summary, the process of focus investing involves these actions:

• Using the tenets of the Warren Buffett Way, choose a few (ten to fifteen) outstanding companies that have achieved above-average returns in the past and that you believe have a high probability of continuing their past strong performance into the future.

• Allocate your investment funds proportionately, placing the biggest bets on the highest-probability events.

• As long as things don’t deteriorate, leave the portfolio largely intact for at least five years (longer is better), and teach yourself to ride through the bumps of price volatility with equanimity.

To learn more about each of the tenets, check out these books.

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Disclosure: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company or individual mentioned in this article. I have no positions in any stocks mentioned.

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