The Name is Buffett, Warren Buffett

The Intelligent Investor —by Warren Buffett

Chetan Parikh on rewriting The Intelligent Investor

Soumik Kar

Chetan Parikh enjoys high recall among value investors in India. Rightly so, as he has contributed the most towards creating awareness about value investing through capitalideasonline. His book, India’s Money Monarchs, co-authored with Utpal Sheth and Navin Agarwal, was the first to chronicle the thought process of prominent Indian investors. Over the years, Parikh has not only built an impressive investing track record, he continues to spread the good word by teaching security analysis at Mumbai’s Jamnalal Bajaj Institute of Management Studies.

Benjamin Graham laid the foundation for value investing, which Warren Buffett built on. But along the way, the architectural design underwent some significant changes. Buffett calls Graham’s The Intelligent Investor “by far the best book on investing ever written” and particularly commends chapters 8 and 20, which deal with the investor and market fluctuations and with the concept of buying securities with a “margin of safety”. While value investors are advised not to, it may be interesting to enter into the realm of speculation, and wonder what Buffett would change if he ever edited the The Intelligent Investor.

He may choose to rewrite parts of chapter 7 dealing with the purchase of “bargain issues” for enterprising investors and could well elaborate: “If you buy a stock at a sufficiently low price, there will usually be some hiccup in the fortunes of the business that gives you a chance to unload at a decent profit, even though the long-term performance of the business may be terrible… Unless you are a liquidator, this kind of approach to buying businesses is foolish. First, the original “bargain” price will probably not turn out to be such a steal after all… there is never just one cockroach in the kitchen. Second, any initial advantage you secure will be quickly eroded by the low return the business earns.”

He probably will not fully agree with certain parts of chapter 14 with its emphasis on the quantitative approach and diversification for the defensive investor. The Oracle of Omaha would add, “We are searching for operations we believe are certain to possess enormous competitive strength 10 or 20 years from now… When we own portions of outstanding businesses with outstanding m

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