Andrew Allentuck

Friday, September 22, 2000

The Warren Buffet Portfolio
by Robert G. Hagstrom
John Wiley & Sons, 246 pages

Berkshire Hathaway, at time of writing sells for US$60,800 per share. That enormous price is a testament to the firm's founder, Mr. Buffett and his belief that one can realize higher returns by knowing a great deal about a few stocks than a little about a lot of stocks.

Author Hagstrom, who specializes in business biographies, tackles the extraordinary intellect of Mr. Buffett in order to understand how he values stocks. What goes into the process of picking stocks is not merely research on earnings per share and so on, but complex estimations of probabilities of future cash flows. Mr. Hagstrom examines the kinds of formulas that goes into the selection system, providing basic rules of good investment behaviour and offering background explanation of the statistical models that justify them.

Rich in insights into the behaviour of both companies and investors, The Warren Buffet Portfolio has the power to transfer some of the master's wisdom and techniques to readers. One would be foolish not to learn what is in the book.