Buffett has said that the true test of a fund is to see its performance over a complete market cycle. Many called the last 10 years the lost decade, where stock investments yields you slightly negative annual return. However, over the same period, Longleaf Partners has returned over 67.7% in total.
In the above letter, there is some interesting discussion on the importance of macro economic understanding to a value investor.
Also read this 1979 Fortune article written by Buffett - You Pay AVery High Price In the Stock Market For A Cheery Consensus . Remember before 1980, for a decade almost nobody wants to own stock. I also love the analogy of treating a basket of stocks as a Dow when trading below book value to a discounted bond. And that the return on equity to be thought of as a coupon rate.
There was also a discussion on replacement value accounting vs. GAAP accounting. haha. Accounting Theory taken last year has opened my eyes to things I've not seen before.
And I can't help but laugh at the editor's note:
Warren Buffett is a down-to-earth man of 48 who prefers to operate out of his native Omaha rather than in the canyons of Wall Street, but the pros regard him as possibly the most successful living money manager, a direct descendant of the legendary Ben Graham under whom he studied. Buffett made a fortune for himself and his clients in the Fifties and Sixties but threw in the towel in 1969 because he could no longer find bargains. Then in late 1974, when the Dow Jones industrials were below 600 and the air was thick with doom, he told Forbes: "I feel like an oversexed man in a harem. This is the time to start investing." Within months, the greatest rally in history began, with the DJI running almost 450 points in a bit over a year. What does Buffett think now? In this article, he puts it bluntly: Now is the time to buy. "
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