My Notes from Warren Buffett Letters to Shareholders 1977.
Warren Buffett on Major Mistakes made both in Products and Personnel..
We experienced significant problems from
(1) a surety operation initiated in 1969,
(2) the 1973 expansion of Home and Automobile’s urban auto marketing into the Miami, Florida area,
(3) a still unresolved aviation “fronting” arrangement, and
(4) our Worker’s Compensation operation in California, which we believe retains an interesting potential upon completion of a reorganization now in progress.
It is comforting to be in a business where some mistakes can be made and yet a quite satisfactory overall performance can be achieved. In a sense, this is the opposite case from our textile business where even very good management probably can average only modest results.
One of the lessons your management has learned – and, unfortunately, sometimes re-learned – is the importance of being in businesses where tailwinds prevail rather than headwinds.
Warren Buffett on Selection of Marketable Equity Securities..
We select our marketable equity securities in much the same way we would evaluate a business for acquisition in its entirety. We want the business to be
(1) one that we can understand,
(2) with favorable long-term prospects,
(3) operated by honest and competent people, and
(4) available at a very attractive price.
We ordinarily make no attempt to buy equities for anticipated favorable stock price behavior in the short term. In fact, if their business experience continues to satisfy us, we welcome lower market prices of stocks we own as an opportunity to acquire even more of a good thing at a better price.
Warren Buffett on Bargains on Business Ownership through Stock Ownership..
…bargains in business ownership, which simply are not available directly through corporate acquisition, can be obtained indirectly through stock ownership.
When prices are appropriate, we are willing to take very large positions in selected companies, not with any intention of taking control and not foreseeing sell-out or merger, but with the expectation that excellent business results by corporations will translate over the long term into correspondingly excellent market value and dividend results for owners, minority as well as majority.
Source: Berkshire Hathaway Shareholder Letters 1977.