My thought on Buffett’s partnership letters

He was definitely well-trained under Graham. He was quite young when he started his partnership but was very disciplined already. Buffett talked about buying a security with a huge margin of safety and would like the stock to go down so that he could buy more of it for less. He was certainly confident with his analysis and calculation of the company’s value.
Another discipline that Buffett used was to compare his performance against the Dow average instead of his performance against the last year. This ensures that when his performance was negative, he’d still be happy if the Dow performed worst; or when his performance was positive but was below the Dow, he’d still be unhappy.
Buffett really understood the importance of having the right yardstick. He understood that anything can be made to look good in relation to something or other. He wanted to be judged against the Dow using the minimum of 3 years.
Another discipline that Buffett followed was to not make any prediction. Buffett made it very clear that he would not attempt to predict how a stock or market moves in a year or two.
A method of valuation that Buffett used was to apply discount to assets such as 40% discount on inventory, 15% discount on receivables … This ensures that if anything happened, a substantial margin of safety would still be there to protect him.

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