Buffett says goodbye

It is safe to say that Dock Street wouldn’t have happened without Warren Buffett. I certainly didn’t start out as a Buffett style investor. The first stocks I bought were South African gold stocks. Simple to understand and I was certain we would all be impoverished by 1984. (I can’t remember now why that was going to happen, but I knew gold was going to prevent it from happening to me.)

Then I met David Strassler, who helped my partners finance the purchase of a small office building in New York. As I got to know David, I discovered that he had bought into Buffett’s hedge fund back in 1962—even before the fund had purchased Berkshire Hathaway stock. David gave me copies of every letter that Buffett had written to partners back then, and like many others in this business, those letters changed my life.

Buffett argued that while the stock market can be seen as a very large casino, there is an underlying reality that stock prices, in the long term, are determined by the cash earnings of publicly traded businesses. Emphasis on the long term. His track record proved he was right. 

Back then, he often said that his approach was 80% Ben Graham (value) and 20% Phil Fisher (growth). After reading the books of these legendary investors, I found myself leaning toward Fisher and growth. When I realized that Buffett’s partner, Charlie Munger, agreed with Fisher, I overcame the embarrassment of being a growth investor.

Some Buffett ideas that still guide our work at Dock Street:

• Find a business with a moat–a sustainable competitive advantage
• Look for CEOs who explain their business enthusiastically, while avoiding promotion
• Common stocks represent pieces of a business, not a lottery ticket
• The accounting model is necessary, but cash earning power is the only true measure of business performance

Warren Buffett announced his retirement last weekend, but his influence on rational stock investors will never dim. Thanks Warren.

Best regards,

Daniel A. Ogden