Category: Analysis of Buffett Partnership Letters

A collection of articles analyzing the Buffett Partnership Letters from 1957 to 1970. These letters contain a lot of valuable and timeless lessons on how to invest small amounts of money. Those who are just starting their investment careers can learn a lot from the letters. They are a must read for every value investor.

 

These are the earliest known texts written by Warren Buffett himself. In these letters, he shared his investment philosophies and results to his limited partners.

 
A short history of Buffett’s partnerships

 

Warren started his first investment partnership on March 1, 1956 with seven limited partners and $105,100 in total capital. All seven are his close family and friends. He would later on start several other investment partnerships. After a few years he folded them all into one single entity called Buffett Partnerships, Ltd.

 

Every year Warren would write his limited partners a letter. In the letter he would report the partnership’s investment results in the prior year. These are known as the Buffett Partnership Letters. Aside from investment results, Warren would also often write about his investment philosophies. He also almost never disclosed what he is buying, a practice he has observed to this day.

 

By 1969, the Buffett partnership has achieved an annual compounded return of 29.5% before fees (24.5% after fees). In contrast, the annual compounded return of the DOW for same period, including dividends, is only 7.4%. If you invested $100,000 in the partnership on 1957, that amount would have ballooned to $1,719,481! The same amount invested in DOW would have grown to only $252,467.

 

Yet in spite of this great record, Warren decided to close the partnerships in May 1969.

 

Why?

 

Because according to him, the stock market has become too expensive. A market that is expensive doesn’t offer a lot of good investment opportunities. So he chose to close the partnership rather than achieve mediocre results for his partners.

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