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Peter Bevelin

A Few Lessons for Investors and Managers

Summary

Bevelin compiles Buffett's investor letters as well as other good sources of value investing into a quick and easy-to-read investing manual

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Key Takeaways
  1. What investing in financial assets is all about - laying out cash today in order to get more cash back in the future
  2. Valuation - follow the cash as it's the only thing you can spend; rough approximations are enough
  3. The value of a business - beware optimistic predictions, accounting jargon
  4. Return on Tangible Invested Capital reflects the cash flow generating characteristics of the business - should be able to generate substantially more than $1 for every $1 invested
  5. Business characteristics
    1. The great - high returns, a sustainable moat and obstacles that make it tough for new companies to enter
    2. The good - earn good returns on tangible invested capital
    3. The gruesome - require a lot of capital at a low return business; I have to be smart every day businesses; fast changing industries;
  6. Past results as a guide - sometimes useful and sometimes dangerous
  7. The importance of trustworthy and talented management - integrity, talent and passion
  8. The importance of clear yardsticks to judge management performance
  9. Corporate governance - board's most important job is to pick the right person to run the business and evaluate their performance
  10. Owners and management - just follow the golden rule; decentralization and trust and loyalty all pay off in multiples
  11. Management compensation - you get what you reward for. Incentives are a superpower
  12. M&A - dumb acquisitions cost owners far more than most other things
  13. A few management issues -  be honest and trustworthy and select people you can trust; look for companies with low HQ costs; clear communication
  14. How to reduce risk - prevention is much better than cure - keep it simple; know when you have an edge and buy with a margin of safety (fewer but larger bets); be conservative with debt; distrust biased advice; avoid mindless imitation and don't be caught up in the latest fads and fashions; pay no attention to forecasting; have the right mental attitude towards market fluctuations
  15. Sometimes mistakes are made - do postmortems on dumb decisions; learn from others mistakes; see the world as it truly is
What I got out of it
  1. Incredible overview of Buffett's investor letters and line of thinking. Highly recommend for anybody remotely interested in investing and how to properly manage a company

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