Glen Arnold - The Deals of Warren Buffett: Volume 2 The Making of a Billionaire

Despite holding positions of Professor of Investment and Professor of Corporate Finance, Glen Arnold concluded that academic life was not nearly as much fun, nor as intellectually stimulating, as making money in the markets. As an investor in his fifties, he now spends most of his time running his equity portfolio from an office in the heart of rural Leicestershire, far from the noise of the City of London.

For decades, his research focus explored the question what works in investment? drawing on the ideas of the great investors, academic discoveries and his own experience, good and bad (see www.glen-arnold-investments.co.uk). While he used to teach on this subject in the City, and supervise PhD students researching stock market inefficiency, he would now rather concentrate on actual investment analysis, but does explain the reasons behind his share purchases and sales as he goes along. He also discusses investment philosophy and ideas at newsletters.advfn.com/deepvalueshares.

He is the author of the UKs bestselling investment book and bestselling corporate finance textbook.

The Deals of Warren Buffett, Volume 1, The First $100m

The Financial Times Guide to Value Investing: How to Become a Disciplined Investor

The Financial Times Handbook of Corporate Finance: A Business Companion to Financial Markets, Decisions and Techniques

The Great Investors: Lessons on Investing from Master Traders

The Financial Times Guide to the Financial Markets

Modern Financial Markets & Institutions: A Practical Perspective

Corporate Financial Management

Essentials of Corporate Financial Management

The Financial Times Guide to Banking

The Financial Times Guide to Investing: The Definitive Companion to Investment and the Financial Markets

The Financial Times Guide to Bond and Money Markets

Get Started in Shares: Trading for the First Time Investor

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First published in Great Britain in 2019

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Hardback ISBN: 978-0-85719-647-7

eBook ISBN: 978-0-85719-648-4

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To great children: Oliver, Sophie, Millie Sunshine, Lyla, Thom, Lola and Alys

I would like to thank the very supportive and professional team at Harriman House. Craig Pearce, senior commissioning editor, helped me tremendously in developing the concept for this series of books and in shaping the work. Charlotte Staley, Lucy Scott, Sally Tickner, Emma Tinker and Suzanne Tull have all put in a great deal of effort to make this book a success thank you all.

It all began in 2013, when I took the big decision to stop other activities to allow full concentration on stock market investing. This meant giving up a tenured professorship, ceasing lucrative teaching in the City of London and, ironically, pulling back sharply on writing books.

To create a record of the logical process in reaching a decision to select a share, I wrote blogs laying out my analysis on a simple website and made it free to all. It was galvanising to be forced to express clearly and publicly the reasoning behind allocating capital in a particular way. And besides, I needed a way to review, a few months down the line, the rationale for the investments made.

The blog became popular, and then the investment website ADVFN asked if I would transfer it to their newsletter page. I accepted, and one strand of my writing there became a series of articles about the investment deals of Warren Buffett (I didnt always have a potential investee company to analyse and I thought readers might be interested in Buffetts rationales and lessons). It is from those articles that this book has been created.

You might think that Warren Buffett has been covered in dozens of published volumes and there is nothing new to say. But having read much of this literature myself, I was left unsatisfied. Other writers address what he invested in and how much he made from it. But I wanted to know why. What were the special characteristics of the companies Buffett chose that made them stand out? Was it in the balance sheet numbers, the profit history, the strategic positioning and/or the qualities of management? I wanted to know the detail. How did Buffett go from step to step in rational investing, from having virtually no money to being very rich?

For each of his major moves, I tried to get to greater depth on the why angle. For each investment, this required fresh investigation, tapping many sources. The priority was to focus on the analysis of Buffetts selected companies, which meant very little time spent on his personal life, which has been thoroughly covered elsewhere.

There were scores of key investment deals to cover and each needed a full analysis. Justice would not be done if they were squeezed into one book and so it made sense to stop the first volume at the point where Buffett reached the milestone of $100m net worth, and when he had consolidated his investments in one holding company, Berkshire Hathaway. This second volume describes the ten key investments that took Buffett from $100m to a billionaire; remarkably, he achieved this by the end of the 1980s.

My eyes were opened to the wisdom of Buffett decades ago. Naturally, I became a shareholder in Berkshire Hathaway, and regularly visited Omaha for the Berkshire Hathaway AGM. My favourite anecdote from my visits to Omaha is the one where I, and I alone, definitely forced Buffett to give away $40bn. You may think Buffett is strong-minded and couldnt possibly be swayed by a visiting Brit. But I know differently and I know Im right!

It happened in 2006, when Bill Gates (this is serious name dropping now!) was with Buffett. Gates is a close friend of Buffett and a director of Berkshire Hathaway. I thanked Gates for the great work he and his wife Melinda were doing with their Foundation I was most effusive, perhaps a little over the top.