Buffett Partnership Letter 1964 Semi

Warren E. Buffett | July 8, 1964

First Half 1964 Performance

Metric	Dow	Partnership	Limited Partners
First Half 1964	+10.9%	+12.0%	+10.5%

Investment Approach

"What we really like to see is a condition where the company is making substantial progress in terms of improving earnings, increasing asset values, etc., but where the market price of the stock is doing very little while we continue to acquire it."

Three Categories Explained

1. Generals (Private Owner Basis) - Undervalued securities where we could achieve controlling positions. Currently three situations where BPL is the largest single stockholder, bought at prices considerably below their value to a private owner.

2. Generals (Relatively Undervalued) - Securities cheap compared to similar quality companies, usually due to large size. "We simply do not know enough about the industry or company to come to sensible judgments - in that situation we pass."

3. Work-outs - Timetable-driven investments dependent on corporate actions (mergers, liquidations, reorganizations). "We wait until we can read it in the paper."

4. Controls - Rare but significant when they occur. "Whether we become active or remain relatively passive depends upon our assessment of the company's future and the management's capabilities."

Duck Analogy

"These figures continue to show that the most highly paid and respected investment management has difficulty matching the performance of an unmanaged index of blue chip stocks. The results of these companies in some ways resemble the activity of a duck sitting on a pond. When the water (the market) rises, the duck rises; when it falls, back goes the duck."

Source

Warren E. Buffett, July 8, 1964.