The Warren Buffett Portfolio: Mastering the Power of the Focus Investment Strategy by Robert G. Hagstrom

Product Description

The sequel to the New York Times bestseller The Warren Buffett Way reveals how to profitably manage stocks once you select them

Staking its claim on the New York Times Bestseller list for 22 weeks, The Warren Buffett Way provided readers with their first look into the strategies that the master uses to pick stocks. The follow-up to that book, The Warren Buffett Way Portfolio is the next logical step. It will help readers through the process of building a superior portfolio and managing the stocks going forward.

Building and balancing a portfolio is arguably more important than selecting any single stock. In The Warren Buffett Portfolio, Robert Hagstrom introduces the next wave of investment strategy, called focus investing. A comprehensive investment strategy used with spectacular results by Buffett, focus investing directs investors to select a concentrated group of businesses by examining their management and financial positions as compared to their stock prices. Focus investing is based on the principle that a shareholder's return from owning a stock is ultimately determined by the economics of the underlying business.

Using this technique, Hagstrom shows how to identify lucrative companies and manage investments synergistically for the best possible results. The Warren Buffett Portfolio draws on the collective wisdom of Warren Buffett and other mavens of focus investing, including economist John Maynard Keynes and investors Philip Fisher, Bill Ruane of the Sequoia Fund, and Charlie Munger, Vice-Chairman of Berkshire Hathaway. It clearly outlines the strategies and philosophies of focus investing and illustrates how to implement them effectively.
Product Details
Amazon Sales Rank: #522220 in Books
Published on: 1999-03
Number of items: 1
Binding: Hardcover
246 pages
Editorial Reviews

Amazon.com
It's no secret that most mutual funds fail to beat the performance of the S&P 500. And if the pros can't beat the averages, it's not unreasonable to assume that most individual investors can't, either. Why? According to Robert Hagstrom, author of The Warren Buffett Portfolio, a big reason is the industry's emphasis on diversification. In the interest of minimizing risk, many investors have "become intellectually numb to its inevitable consequence: mediocre results." As a result, they wind up owning too many stocks and churn their portfolios unnecessarily (for example, the average mutual fund holds 100 stocks and turns over 80 percent of its portfolio annually). In The Warren Buffett Portfolio, Hagstrom shows how Buffett and others use the idea of focus investing to organize winning portfolios.

Unlike Hagstrom's first book, The Warren Buffett Way, which describes how the world's greatest investor selects individual companies, this book looks at the mathematics, the psychology, and the mental models necessary to build a successful portfolio. The basic ideas: Pick no more than 10 to 15 companies with good track records and high probabilities of future success; plan to hang onto them for at least five years; and ignore predictions and the sometimes terrifying swings in market behavior. It's hard to argue with Hagstrom's approach, especially when he practices what he preaches. His fund, the Legg Mason Focus Trust, has 15 stocks, an annual turnover rate of 9 percent, and percentage annual returns in the mid-30s. For thoughtful investors and devotees of Warren Buffett, who are looking for more than the next hot stock tip, The Warren Buffett Portfolio is well-written guide. Recommended. --Harry C. Edwards

From Publishers Weekly
In a straightforward follow-up to his bestseller, The Warren Buffett Way, Hagstrom shows how to put Buffett's ideas into practice. Buffett, universally described as one of the world's greatest investors, has made a fortune with a number of extremely large bets on a relatively small number of companies. By doing so, Hagstrom, who runs a mutual fund for the Legg Mason investment house, correctly points out that Buffett flies in the face of orthodox notions of portfolio diversity. Buffett's approach, which Hagstrom calls "focus investing," limits his investments to an extremely small number of stocksA10 or 15Athat he thinks have the greatest long-term potential. In The Warren Buffett Way, Hagstrom identified how Buffett chooses those stocks. And here, in his straightforward followup, he shows the benefits of this approach: if you pick right, returns will be far greater than the market as a whole. The problem, of course, is that you have to pick winners. That, as Hagstrom notes, still takes hard work and discipline.
Copyright 1999 Reed Business Information, Inc.

From Library Journal
In this companion to his very successful The Warren Buffet Way, Hagstrom now draws on the wisdom of Buffett; Charlie Munger, vice chair of Berkshire Hathaway; and other successful investors to outline the strategies and philosophies of what is called focus investing and to effectively implement this highly complex investment strategy. In the focus investment model, the basic idea is to pick no more than ten to 15 key companies with good track records and high probabilities of future success, hang onto them for at least five years, and ignore predictions and the sometimes terrifying swings in market behavior. While The Warren Buffett Way described how the world's greatest investor selects individual companies, this time Hagstrom looks at the mathematics, the psychology, and the mental model within this next wave in investment strategies, so successfully implemented by Buffett. The solid narration by Stefan Rudnicki will keep investment-savvy listeners attentive to this valuable advice, which has also proven successful by Hagstrom's own fund, the Legg-Mason Focus Trust. Highly recommended for all public and university libraries supporting a business curriculum.ADale Farris, Groves, TX
Copyright 1999 Reed Business Information, Inc.
Customer Reviews

A lattice of mental models for investing
The book is short, but gives you a lot to think about. I was interested in it mainly because Munger and Buffett gave it a nod. Many of the concepts were enlightening, he presents some good empirical evidence to support his arguments, and he hits all of the main points of the focus investment strategy which Buffett uses. He could have gone into a little more detail in the mathematics section, where I found myself dissatisfied with his unnecessarily vague and subjective treatment of the core concepts of probability. I say unnecessarily because I realize the purpose of the book is to give investors a mental framework for successful investment, but he could have easily included some practical information for investors on how to actually implement these strategies. For instance, a short example of his own, describing in detail the use of expected value (a simple statistical measure he alludes to but never mentions), would have helped to remedy the situation. He actually shows a simplified form of the Kelly Criterion (where payout is fixed), but failed to also include the more useful formula, which would have better shown the critical link between payout odds and probability (which together make up expected value), and optimal betting size. Sometimes little things like this make all the difference in our understanding, but in certain instances in the book he presents them as isolated concepts, and the informed reader is left believing the author doesn't really have a strong grasp of what he is writing, or at least didn't do a very good job of connecting his ideas together. He leaves it up to you to do the work of integrating the ideas into one. Still, he gives you the basic models you need, and does do a really good job incorporating his interviews with Buffett, Munger, Ruane, etc. into the book. If you will take the time to investigate and fill in the details, his theories will solidify nicely into one very powerful model, and this book will have served its intended purpose well.

Read Buffett, don't waste time with Hagstrom
I bought it, by the title mentioning W.B.
Wasted money: Whenever it comes to the details, he refers to his other book "The W.B way" (which I do not have, amazon ratings are poor though). Nothing wrong with the contents, but nothing new either. Just read the Berkshire Hathaway Annual Letter to the Shareholders (free on the web), with more and actually useful info. This book has ZERO value after reading the Letters, and this book ALONE does not quite help you picking stocks (although makes a good point in favor of WB's way)

Waste of time
Go right to the heart of the matter with Graham and Dodd's "Security Analysis" if you want to know how Buffett started. Hagstrom's book is a poorly executed fifth grader's book report on the primary investing philosophy of Buffett. Don't waste your money here. You'll regret it. This doesn't even scratch the surface of relevant information.