Learning from Warren Buffett Shareholders Letters - Year 1981 - Buying stocks at the right price.

26th May 2024


Learning from Warren Buffett Shareholders Letters – Year 1982 – Buying stock at the right price.


Dear Investors,

Namaste! After talking about the business valuation from economic perspective rather than the accounting perspective – the nest Master talks about buying partial ownership i.e. stocks. He shares meaningful insights about buying the stock. That insights are relevant at this moment in the Indian Market. 

Indian Market Now: -

Market has made the new high two days back. Our Home Minister / Finance Minister / PM and now the Foreign Minister are talking about market making a record on 4th June 2024. 

Now most of the real good stocks are traded at 50-100 p/e. It means if the companies keep on showing the same growth rate – you will need 50-100 years to recover your money back. 

With the back ground let us see what Master had said in 1982 letter: - 

Our partial-ownership approach can be continued soundly only as long as portions of attractive businesses can be acquired at attractive prices.  We need a moderately-priced stock market to assist us in this endeavour. The market, like the Lord, helps those who help themselves.  But, unlike the Lord, the market does not forgive those who know not what they do. For the investor, a too-high purchase price for the stock of an excellent company can undo the effects of a subsequent decade of favourable business developments.

(read the RED MARKED LINES if you are very much enthusiastic to buy overpriced stocks Now).

Master continues……

Should the stock market advance to considerably higher levels, our ability to utilize capital effectively in partial-ownership positions will be reduced or eliminated. This will happen periodically:

( Today we have the same problem. Market is overheated and we can’t buy the stocks at attractive valuations as it was possible in the fall of March 2020). 

Why Master likes the Shares?

However, this very unevenness and irregularity offers advantages to the value-oriented purchaser of fractional portions of businesses. This investor may select from almost the entire array of major American corporations, including many far superior to virtually any of the businesses that could be bought in their entirety in a negotiated deal. And fractional-interest purchases can be made in an auction market where prices are set by participants with behaviour patterns that sometimes resemble those of an army of manic-depressive lemmings.

Within this gigantic auction arena, it is our job to select businesses with economic characteristics allowing each dollar of retained earnings to be translated eventually into at least a dollar of market value.

(this is his master lesson for investors across the asset classes. Your rupee invested must generate at least a rupee).

Master Quotes PASCAL:-

Pascal’s observation seems apt: “It has struck me that all men’s misfortunes spring from the single cause that they are unable to stay quietly in one room.”

What NEXT?

This is the most powerful lesson for all the investors who are not sitting quietly in the one room. 

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Learn a Lesson. Live with Passion & Invest with Reason.

Hitesh Parikh.