The Warren Buffett Portfolio: Mastering the Power of the Focus Investment Strategy (Hardcover)

by Robert G. Hagstrom (Author) "I REMEMBER THAT conversation with Warren Buffett as if it happened yesterday..." (more)
Key Phrases: focus investing, focus investors, focus portfolio, Warren Buffett, Berkshire Hathaway, Charlie Munger (more...)

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

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.

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Product Details

• Hardcover: 246 pages
• Publisher: John Wiley & Sons (March 1999)
• Language: English
• ISBN-10: 0471247669
• ISBN-13: 978-0471247661
• Product Dimensions: 9.1 x 6.1 x 1.1 inches
• Shipping Weight: 1 pounds
• Average Customer Review: 3.8 out of 5 stars See all reviews (32 customer reviews)
• Amazon.com Sales Rank: #196,695 in Books (See Bestsellers in Books)

Customer Reviews

Most Helpful Customer Reviews

68 of 75 people found the following review helpful:

4.0 out of 5 stars Good Book, but "Buffettology" is Better., October 1, 1999

By A Customer

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.

27 of 27 people found the following review helpful:

5.0 out of 5 stars Warren Buffett Portfolio---An Investment Gem, January 18, 2001

By A Customer

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). Hagstrom's approach is obviously not for everyone--despite its simplicity and logic, few professionals or individuals, in my experience, have the patience or discipline to concentrate their investments and stay with them over a period of years. But for those people looking for an approach that cuts through all the clutter in the investment world, this book is worth a read. For what it is worth, the best book on Buffett himself is Lowenstein's "The Making of an American Capitalist;" other must read or own books for do-it-yourself investors would include "Investment Policy" by Ellis, "Against the Gods" by Bernstein, "The Gorilla Game" (for technology stock investing) by Moore, "Classics" and "Classics II " by Ellis, and "When Genius Failed" by Lowenstein.

21 of 21 people found the following review helpful:

5.0 out of 5 stars This book adds something to the existing literature., May 7, 1999

By A Customer

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."