Pabrai's Perspectives on Investing

Anyone read "James Altucher's must-read Trade Like Warren Buffett?" I avoided based on the "Trade Like" title. Would you recommend it?

I avoided based on the "Trade Like" title. Would you recommend it?

I avoided it for the longest time for exactly the same reason.

If it weren't for the fact that I buy everything about Buffett (and some of it is as awful as it sounds), I would never have read this book.

It's a terrible title. However, there is a point to using it and once you read the book, the title will make perfect sense – but until you do it sounds like a bargain bin book trying to cash in on Buffett's fame with naïve investing newbies.

Altucher isn't trying to deconstruct the Coke type investments. Instead he tries to look at some of Buffett's lesser known moves, unconventional ones (like junk bonds), etc. Some of these are worth considering.

Buffett's had success in a lot of different areas. His partnership did things very differently than Berkshire. He held many more Grahamian bargains. Sanborn Map is the best known example and in some ways quite similar to Graham's Northern Pipeline Co. experience.

Anyway, I'd say the book is very good – though not great. If you read lots of the more general stuff on Buffett and are tired about hearing only about Coke, Gillette, etc. this is a good book to try.

Altucher explains it well on the first page: "This book is about the various ways that Buffett has applied the concept of margin of safety outside of his buy and hold strategies".

Even better he notes that "…I can think of no one who has invested with a more diverse group of strategies over the pasty fifty years." He's wrong of course, but he's trying to make an important point. In actuality, Buffett has invested across a diverse group of investments using a remarkably consistent strategy. He focuses on his best ideas, bets big, and always insists on a margin of safety. Those things remained the same, everything else changed – and may still change along with his circumstances (market valuations, the amount of cash he needs to deploy, etc.)

Anyway, while I disagree with Altucher on some points. It's a very good book overall, because he had such a great concept to start with. His chapters on Buffett's "relative value arbitrage", "PIPEs and High Yields", and "Warren Buffett's Personal Portfolio" are very good.

Sometimes he pushes a bit too far, especially when he's trying to connect Buffett's decision making to recent examples, things you can put into practice, etc. For instance, he talks about Buffett's "market calls" – basically times when Buffett either said something (usually to the press) or did something (closed down the partnership) that made it clear he thought the market was extremely undervalued or overvalued.

Unfortunately, his way of connecting it to us is through a roundabout discussion of the Fed model which he says Buffett doesn't use – instead of making clear what Buffett himself has said: that you can look at a reasonable expectation of a risk free interest rate (i.e., where the long bond ought to be - so don't use the long bond as the discount rate when rates are clearly and abnormally low) vs. the earnings coupon on the Dow, S&P, etc. as a whole. He's been explicit about the comparison a few times, including when he compared the Dow trading below book and normally earning a 13% ROE to a bond below par with a 13% coupon.

Anyway, these are small points. The book is worth reading for its clear discussion of Buffett's lesser known moves. It may even give you a new appreciation of Buffett's skill.

Also, Altucher writes much more clearly on investing than some business journalists who may understand Buffett the man but are hopelessly lost when they try to explain Buffett the investor, except to say buy great companies and hold them forever.

The book's weak points come whenever he turns away from Buffett and his record. He gives non-Buffett examples of the same phenomenon, interviews managers who emulate Buffett, etc. I found those parts added nothing to the book. But, the Buffett centric stuff more than made up for it.

I definitely recommend it for you.

(But not for any one who hasn't already read a few books on Buffett – this is NOT the place to start).

For some reason typing my response about Altucher's book just reminded me of an academic paper online entitled "THE EVOLUTION OF THE IDEA OF "VALUE INVESTING":FROM BENJAMIN GRAHAM TO WARREN BUFFETT".

It's written like most such papers which makes it a somewhat less compelling read than the subject deserves. However, it's a pretty good overview with some details on the subject that aren't cited as often as they should be.

Worth reading if you have a chance.

You can find it at:

http://www.econ.duke.edu/dje/2000/table%20of%20contents.html

Or, better yet just google "THE EVOLUTION OF THE IDEA OF "VALUE INVESTING":FROM BENJAMIN GRAHAM TO WARREN BUFFETT"

It should be the top result.

I have ordered "Trade Like Warren Buffett" and "The Dhandho Investor." Also, thank you for pointing me to the evolution of value investing; it was a nice summary of both Graham and Buffett.