Buffett Partnership Letter Summary

Buffett Partnership Letters (1957-1970)

Buffett Associates Ltd was started by Warren Buffett in the middle of 1956 shortly after his mentor, Benjamin Graham, announced his desire to retire. It was the first partnership and began with 7 investors and $105,100 in assets (Warren kicked in the extra $100). Overtime, additional partnerships were formed to accommodate new investors and eventually all the partnerships were combined into a single entity.

Overall partnership performance.

Year Dow Return Partnership Return Returns After Fees
1957 -8.4% +10.4% +9.3%
1958 +38.5% +40.9% +32.2%
1959 +20.0% +25.9% +20.9%
1960 -6.2% +22.8% +18.6%
1961 +22.4% +45.9% +35.9%
1962 -7.6% +13.9% +11.9%
1963 +20.6% +38.7% +30.5%
1964 +18.7% +27.8% +22.3%
1965 +14.2% +47.2% +36.9%
1966 -15.6% +20.4% +16.8%
1967 19.0% +35.9% +28.4%
1968 +7.7% +58.8% +45.6%
Total +185.7% +2610.6% +1403.5%
CAGR +9.1% +31.6% +25.3%

To calculate the amount you would have made if you invested with Warren, visit the compounding calculator.

It makes sense to study from the best so I have summarized the key issues from each individual partnership letter. If you would like to read the entire compilation of the partnership letters, click here to visit a site that has the full 152 page document. Otherwise, stick around and read the summaries. Read More »

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Federated Investors (FII) Update

A Recap

A post for Federated Investors was made last November 2012 (click here to view prior post) and some shares were purchased. It was a good business selling at a cheap price due to regulatory overhang and lower than normal business earnings. Since then, the SEC and IRS have proposed changes for the money market industry and fee waivers have been reduced. The stock has increased to $28.80 a share and I no longer hold shares of the stock. Read More »

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The Interpublic Group of Companies (IPG)

Interpublic Group (IPG) – BUY

Interpublic Group is a good business selling at a good price.  At the current price ($11.94), Interpublic trades at a discount to peers.  Catalysts for stock appreciation include:

1)      Recognition of a successful turnaround

2)      Increase in ad spending on new forms of media

3)      Buyout due to further consolidation in the ad agency industry

Company Overview

Interpublic is one of the largest ad agencies that purchase media and provide creative services for clients.  Ad agencies have buying power that is much greater than their individual clients and with economies of scale, act as a toll booth to advertising spending.  The business is not capital intensive and benefits from a float where Interpublic receives payment from clients before paying for media advertising. Read More »

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Federated Investors (FII)

Federated Investors (FII) – BUY

Federated Investors is a good business selling at a cheap price due to regulatory overhang.  At the current price ($18.80), the stock is selling at a 6.6 EV/EBIT ratio (assuming $280 million EBIT for the year).  Catalysts for price appreciation include:

1)      An end of regulatory overhang with positive outcome for money market funds.

2)      An end of fee waivers for money market funds.

Company Overview

Federated Investors is a one stop shop asset management company with funds to meet the strategies of any client.  Asset management is a good business because it scales well and once fees from AUM is enough to cover fixed costs, the additional revenue from AUM increase and positive fund performance adds directly to the bottom line.  The largest groups of asset classes for the investment funds at Federated are Money Market (76% of total AUM and 50% of revenue), Fixed Income (12% of total AUM and 20% of revenue), and Equities (9% of total AUM and 30% of revenue).

Money market funds are mutual funds that invest in short term paper from the government and high grade corporations.  Fixed income funds invest in bonds with a longer maturity.  Equity funds invest in stocks. Read More »

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