Buffett Letter: 1959

1959

  • The DJIA made progress but there were more stocks in the red on the NYSE than in green.
  • Buffett is skeptical of the levels of stock markets. He says the blue chips have a substantial speculative component in their pricing with a corresponding risk of loss.
  • He reflects that there could be other standards of valuations which is evolving but he doesn't think so finally. He is happy to face penalties of over conservatism than face permanent loss of capital. He calls this 'New Era' of investing as a philosophy where trees grow to the skies.
  • All his 6 partnerships were in profit and the only operating expense he has is the Nebraska tax of 0.4%. This looks extremely small.
  • In 1958 he invested in a Work Out which now is 35% of the portfolio. This investment is itself invested in 30 to 40 other high quality securities.
  • Rest of the portfolio is in undervalued and some work out operations. He is confident that his overall portfolio will lead to superior results in bear markets and average results in bull ones.
  • In every year so far he has focused on preservation of capital. That is why the emphasis on managing to do well in bear markets. I think the focus of going on at a comfortable compounding rate is the core essence. Beautiful approach.

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