Warren Buffett Investments in the 50’s (summary of letters to shareholders)

by admin on May 14, 2020

Warren Buffett Investments in 1957 (Letter to Shareholders)

Warren Buffett Letter to ShareholdersWarren Buffet had three partnerships in 1957. That year he outperformed the market with all three partnerships with 6.2%, 7.8%, and 25% for the year. The market in 1957 was down 8.470%, including dividends.

His position at Commonwealth Trust Co. of Union City of New Jersey that he called a “work-out,” accounted for 10% to 20% of the portfolio of various partnerships. This was an arbitrage position of a company expected to be acquired by a larger bank. He says, “Obviously, during any acquisition period, our primary interest is to have the stock do nothing or decline rather than advance.” Warren Buffett found a lot of value in acquisitions that he could predict.

In 1956, 30% of his portfolio was held in arbitrage positions, but he reduced it to 15% in 1957. In the back part of 1956, It was a decline in the stock market, and Warren took advantage of the low price to buy some securities.

In the newsletter, he acknowledges that he is most likely to do better in bear markets than in bull markets.

Download Warren Buffett letter to shareholders – 1957 here

Warren Buffett Investments in 1958 (Letter to Shareholders)

The size of the stock market in 1958 was very tiny when compared with today’s markets. The stock Commonwealth Trust Co. of Union City of New Jersey that he owned had just 300 stockholders, and it was transacted only twice a month. The bank was making good profits, but because it wasn’t paying dividends its was undervalued. Warren was expecting the bank to be acquired by a larger bank with a 25.5% stake in it, but the transaction was taking too long, and other investors that took note of the opportunity as well were causing the stock to rise.

Because of this, he decided to sell and focused on building positions where he had more control over the outcomes. Warren had very concentrated portfolios in 1957 and 1958. In 1958 one of his positions represented 25% of the assets he was managing through five different partnerships he had.

In 1958 the market was overvalued, and in years like this, Warren was expecting just to keep up with the market, not beat it. In some of the partnerships he did, in others not. The stock market that year was up 38.5%, and gains from Warren Buffet partnerships ranged from 36.7% and 46.2%.

Download Warren Buffet letter to shareholders 1958 here

Warren Buffett Investments in 1959 (Letter to Shareholders)

in 1959 Warren’s portfolio was very concentrated. One of his positions represented 35% of the entire portfolio, but in this case, it was an investment fund where he had majority ownership, and the company owned 30 or 40 of other stocks within.

Although the stock market was up 19.9% in 1959, Warren Buffet managed to beat it barely at 25.9% averaging the results of all his partnerships.

In 1959 Warren was investing the other 65% of his portfolio in stocks and work-outs (arbitrage positions) that he considered where shield from the behavior of the general market.

Download Warren Buffet letter to shareholders 1959 here

Previous post: