Pysh - Warren Buffett’s 3 Favorite Books: A guide to The Intelligent Investor, Security Analysis, and The Wealth of Nations

Warren Buffetts

3 Favorite Books

A guide to The Intelligent Investor, Security Analysis, and The Wealth of Nations

Did you know Warren Buffett, the worlds wealthiest stock investor, is quoted as saying three books have shaped his investment philosophy? For more than half a century, he used the information provided in these three books to go from nothing to a massive $39 billion net worth. The three books that gave him this wisdom are: The Wealth of Nations (pub. 1776) by Adam Smith, Security Analysis (pub. 1934) by Benjamin Graham, and The Intelligent Investor (pub. 1949), also by Benjamin Graham.

Infact, Benjamin Graham was Buffetts professor at Columbia and themost influential financial advisor he ever had.

So,have you ever tried reading Grahams books? Many might agree thebooks are as exciting as listening to Ben Stein read the 30thpage of The Wall StreetJournal.

Itis time we fixed that. Instead of keeping these billion-dollarsecrets hidden behind thousands of pages of financial jargon, I wroteone simple guide WarrenBuffetts Three Favorite Books.

Ifyoure looking for a guide that explains how the wealthy reallythink and buy assets, youre in the right place. This isnt aget-rich-quick book. Instead, this is where your investingtechniques take a turn in the road. This book will teach you how toaccumulate assets and become very wealthy over decades of wisedecisions and proper asset valuation. The best part about the bookis the methods are taught in an easy-to-follow and understandablescenario for all to enjoy!

Warren Buffetts 3 Favorite Books copyright 2012 by Preston Pysh. All rights reserved. Printed in the United States of America. No part of this book may be used or reproduced in any manner whatsoever without written permission except in the case of reprints in the context of reviews. For information, write the Pylon Publishing Company, at info@pylonpublishing.com.

Library of Congress Cataloging-in-Publication Data

Pysh, Preston G.

Warren Buffetts 3 Favorite Books/Preston G. Pysh

p. cm.

ISBN 978-0-9829676-2-1

1. Business & Investing. 2. Personal Finance. 3. Finance. 4. Investing.

Book Design by Pylon Publishing

This publication is designed to provide accurate and authoritative information in regards to the subject matter covered. It is sold with the understanding that neither the author nor the publisher is engaged in rendering legal, investment, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional person should be sought.

Contents

ACKNOWLEDGMENTS

Thankyou to my wife, Demi Pysh, who has stood by me every waking moment. Your strength and encouragement is far greater than anyone will everknow. Even though I sometimes talk about the most boring things onthe planet, you always listen and encourage me to be myself. Kellyand Jenny thanks for tolerating my dinner table business talk, Imsure its every 14 and 11 year olds dream. Youre the bestnieces an uncle could ever have.

Iespecially want to thank Mac Davis for his input on the financialrisk portion of the book. All of chapter 5 was written by Mac andhis contributions are greatly appreciated.

Idlike to thank Jonathan Kozial for giving me the idea to write thisbook back in 2010. Your confidence in my ability to write such abook was the motivation I needed to get off my butt and execute. Bythe way, youre not as bad of a pilot as everyone says you are.

Aftercompleting the manuscript, Jacob Marceaux was the first person towillingly read my content. Your selflessness and candid input cannotbe repaid. Im so thankful for your friendship and contributionsto this project.

Idlike to thank Adam Berlew for his input to the content found at www.BuffettsBooks.com ,and Ruth Goodman for her tireless efforts editing the content.

Idlike to thank my parents Bill and Gwen Pysh for their continuedsupport and feedback.

Thereare numerous people that have contributed to the success of this bookand the content that surrounds it. Although you might not bementioned by name, I appreciate your contributions equally. Thankyou.

PART I

THE FOUNDATION

In the late 1990's, the worlds wealthiest stock investor, WarrenBuffett, purchased a massive sum of bonds during the countryslargest growth spurt in stock market history. As dot-com investorsmade exuberant amounts of money, experts used Buffetts financialdecisions as a punching bag for every business talk show across thecountry. Many cast the Oracle of Omaha as a has-been andirrelevant. As everyone knows, the five-year boom was quicklyfollowed by an abrupt bust, leaving countless investors broke. Itshould come as no surprise that the billionaire investor was poisedand prepped with billions in cash on hand (from his bonds) to pick upthe scraps of the fallen wannabe traders, exponentiallyincreasing his wealth after the crash.

Almostany investor would argue that Buffett possesses the most keen andinstinctual ability to predict market behavior. I would argue theexact opposite. In fact, Id actually declare Buffett is morereactive than proactive in his investment strategy.

NowIm sure you might be raising an eyebrow reading that lastparagraph, but as you read through this book, youll quicklyunderstand that Buffetts ability to simply adapt to the currentmarket conditions, and always know the value of his investments, iswhat made him the best stock investor of the 21stcentury.

Assuggested on the cover of this book, Warren Buffett has shaped hisinvesting technique from three books. Unfortunately for many, thesebooks are very difficult to read and understand especially if youare just starting on your financial journey. Thats why I wrotethis book: to provide an abbreviated and understandable version ofthose important investing books.

Everyonewants the crystal ball in order to make a lot of money. The problemcompounds when those same people want to make a lot of money quickly. If youre one of those people, youve got the wrong book. Thisbook will not teach you how to pick the company that will turn yourthousands into millions in under three years. If thats whatyoure looking for, youll be disappointed. With that said, ifyou want to learn how to value stocks, exercise patience, andaccumulate assets over time, then this book should be a great startfor your financial journey.

Youdont have to be from Wall Street to know there is an inordinateamount of money to be made in financial markets. This is somethingeveryone feels and believes but doesnt understand how toimplement. The reason most investors cant take advantage of thisintuition is a few simple words: emotions, patience, and knowledge.

Letsstart with the basics. People acquire financial wealth byaccumulating assets. In short, an asset is anything that adds moneyto your pocket each month instead of taking it away. If accumulatingassets is the key to building wealth, accumulating liabilities wouldaccomplish the exact opposite. So one can quickly agree thatpurchasing a $60,000 vehicle that looses $15,000 a year in equity isan enormous liability.

Understandingthe simple rule that asset accumulation is the means to financialsuccess, Ill waste no time in identifying the two most lucrativeways to build assets: owning businesses and providing loans. Surprised? You shouldnt be. Businesses are nothing more thanpurchasing stocks, and providing loans is nothing more thanpurchasing bonds.