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The Warren Buffett Portfolio: Mastering the Power of the Focus Investment Strategy Paperback – January 1, 1999


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Product Details

  • Paperback: 256 pages
  • Publisher: Wiley; 2nd edition (January 1, 1999)
  • Language: English
  • ISBN-10: 0471392642
  • ISBN-13: 978-0471392644
  • Product Dimensions: 8.7 x 5.6 x 0.7 inches
  • Shipping Weight: 12 ounces (View shipping rates and policies)
  • Average Customer Review: 3.7 out of 5 stars  See all reviews (37 customer reviews)
  • Amazon Best Sellers Rank: #86,940 in Books (See Top 100 in Books)

Editorial Reviews

Amazon.com Review

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 --This text refers to an out of print or unavailable edition of this title.

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. --This text refers to an out of print or unavailable edition of this title.

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Customer Reviews

Stocks are not precisely described by this outcome.
J. Golton
It is also the only book on Buffett's investing philosophy recommended by the titanic Charlie Munger..
Tony Ashan
The author covers several important topics, in a summarized way, but also in a very interesting way.
John C. Dunbar

Most Helpful Customer Reviews

38 of 38 people found the following review helpful By A Customer on January 18, 2001
Format: Hardcover
Hagstrom's second book is outstanding, especially for anyone looking to develop and define a rational investment style and process for managing their own money. As a professional money manager, I have read many books on investing, and like to refer the better ones to my clients. This one would be at the top of my recommended list, because it is clearly written, logical in its approach (Hagstrom backs up the tenets of his "focused portfolio" approach to investing with good empirical data), and provides a consistent and rational framework for people to invest their money. Hagstrom advocates that investors own relatively few stocks (maybe 10-15), and concentrate their holdings in companies that have a high probability of enjoying financial success over the long term. He points out the risks of this approach (fewer stocks in a portfolio can result in higher than average portfolio volatility in the short run, which can be disconcerting to some investors), but also highlights the success that Buffett and other practicioners of a long term, focused approach have had historically. Hagstrom includes interesting discussions of the math underlying his strategy, and the psychological factors that predispose a person to embrace or reject the principles of investing he recommends. The beauty of the book, and the focused portfolio approach to investing, is that it is logical, supported by solid mathematical principles, makes sense intuitively, is relatively easy to apply, skews the odds of outstanding absolute and relative total returns in the investor's favor, and provides a solid framework against which to invest in a world that is fraught with risk and dominated by a media culture that probably hurts more individual investors it helps (CNBC, internet sites, mutual fund advertising, etc).Read more ›
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72 of 80 people found the following review helpful By A Customer on October 1, 1999
Format: Hardcover Verified Purchase
I liked this book and I'd certainly recommend it. However, Mary Buffett's "Buffettology" is a much better book. The two books compliment each other well, but if you're only looking for one book get "Buffettology" instead. This book is generally about NOT diversifying your stock portfolio. "Buffettology" is a much better book about Warren's OVERALL stock investment techniques.
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25 of 25 people found the following review helpful By A Customer on May 7, 1999
Format: Hardcover
I read this book the week before the annual meeting and hoped Warren or Charlie would comment on it. Charlie Munger did not disappoint. He recommended it even though he did not care for Hagstrom's first book. As someone who enjoys reading Charlie's ideas and philosophy, which are usually published in Outstanding Investor's Digest, I found this book to be quite interesting. New and different ideas are covered which may inspire the reader to investigate further. The topics of probability and psychology are discussed as they relate to investing and some actual data is presented instead of the usual anecdotal evidence. If Charlie recommends it, it must be worth reading. Other books he recommended at the meeting were Ron Chernow's "Titan: The Life of John D. Rockefeller, Sr." and David Landes' "The Wealth and Poverty of Nations." Warren Buffett recommended reading Washington Post Chairman Katherine Graham's autobiography "Personal History" and John Bogle's "Common Sense on Mutual Funds."
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23 of 25 people found the following review helpful By Gregory McMahan VINE VOICE on February 28, 2001
Format: Hardcover
Don't get me wrong- I learned a lot of valuable lessons about investing from this book. However, I believe most people don't understand the true secret of Mr. Buffet's success, and that is his ability to buy influential stakes in large concerns that he understands thoroughly. Buffet is not the typical small investor who is trying to nickel and dime his way to riches. Far from this, he is a man who has a lot of cash behind him, and can wield that cash to obtain seats on the boards of promising companies. Once there, using a bit of common business sense and uncommon financial influence, he can effect positive change in a company (there may also be a few derivatives being bandied about to boot). None of us small investors can ever do that.
Like I said, I learned a lot from the book. Instead of telling me which stock to buy, the book offered me basic principles to guide me in my investment activity. The book also helped me to better understand my own financial behavior and accurately diagnose my investment temperament. It also gave me some very important pieces for a strong blueprint for successful investing. Three of the most important lessons that I took from this book are first, buy only those companies that you understand intuitively, second, be patient with your investments, and third, the most important lesson, never hesitate to buy into quality and transparency. The book also pointed me in the direction of other references that I believe are worth reading, such as John Burr Williams' Theory of Investment Value, Benjamin Graham's Security Analysis, B. Graham's Intelligent Investor, and Philip Fisher's Common Stocks and Uncommon Profits.
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7 of 7 people found the following review helpful By John C. Dunbar on January 14, 2005
Format: Paperback
This book presents Buffet's and Hagstrom's portfolio allocation methods. I say Hagstrom's because I think that much of Buffet's allocation methodology remains between Buffet's ears -- and not that of Hagstrom the author. Also, I believe Buffet is more opportunistic; he acts decisively when opportunities present themselves.

The author adds discussion of technology stocks, an anathema of Buffet's, and the obligatory discussion of complex adaptive networks which might not be Buffet thinking but more along the lines of Charles Munger, his cohort.

Nevertheless, there are many interesting points in this book. I listened to the audio tapes and they excellent. I then took the book out from the library and liked the tapes more.

The author covers several important topics, in a summarized way, but also in a very interesting way. One topic done well was thinking in terms of probabilities. Another was diversification: don't over-diversify.

The author also quoted from several books outside of the financial area and have become intrigued with them. They were: Fire in the Mind (Johnson), Full House (Gould), Against the Gods (Bernstein).

I think Hagstrom is a very good author but his works seem to lack the detail that I like to see. He's one that can pull the strands of many topics together but perhaps skates over their details. I would have liked more detail on subjective probabilities as applied to the stock market for example. More on how Bayes, etc.

John Dunbar

Sugar Land, TX
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