Book Review > Buffett Beyond Value: Why Warren Buffett Looks to Growth and Management When Investing

Plenty has been written over the years about Warren Buffett and his amazing long-term investment record.  It seems, too, in more recent years, that there has been a growth industry in writing about his methodology.  Buffett Beyond Value: Why Warren Buffett Looks to Growth and Management When Investing, by Professor Prem Jain, is an addition to that line, but one that is insightful and very readable, and provides a practical guide for those wishing to better understand Buffett’s approach and investment principles and apply them to their own circumstances. 

The book originates from a course Jain developed in 1997 at Tulane University in New Orleans, where students studied Buffett’s writings and decisions together with investment research – and later managed a $US2m portfolio to put their learning into practice. The book combines and compares, in a systematic way, Buffett’s actions with the academic approach to investment, looking for answers that can be put into practice by investors, whether in a bull or bear market. Its publication is timely, in that it takes into account the Global Financial Crisis during 2008–09 and comes at a stage in the investment cycle when many are wondering how to go about selecting suitable companies for their portfolio.

One of the strengths of this book is that it is very readable, both for its style of writing and its structure.  It comprises 30 chapters (304 pages), divided into 9 parts. Each part contains a short overview, and each chapter an introduction and a conclusion summarising the chapter. A short appendix summarises the book. Together with a detailed index and clear chapter sub-headings, it is easy to find what you want. It is a book that can be read a section at a time and need not be read from cover to cover in one sitting. The author often takes a question and answer approach to issues, and breaks them down into their components, all of which helps the reader understand them more thoroughly.

The titles of the parts provide a good outline:

Introduction and Background Buffett Investing = Value + Growth Other People’s Money Success in Retailing, Manufacturing, and Utilities Risk, Diversification, and When to Sell

Market Efficiency Profitability and Accounting Psychology Corporate Governance

Seven principles summarise the book:

• Develop a Mind-Set to Win
• Stick with Value Investing
• Combine Growth Investing with Value Investing
• Maintain Low Risk
• Act Rationally
• Do Not Pay a High Price
• Find Good People

Plenty of examples are provided throughout, including of other companies, as well as reflections on the research and observations of other notable investment researchers and managers such as Lynch and Fisher.

Jain shows how Buffett, often thought of as a value investor, in fact combines value and growth in his decisions.  He emphasises the importance of good management and integrity to Buffett in making his decisions, rather than relying on financials alone, something we can easily get caught up in.

Most investors across all levels could benefit from this book, although beginners may struggle at times with some of the technical terms and principles referred to. A glossary of terms and generally accepted investment principles for those comparatively new to investing would enhance the book’s appeal. While there are plenty of footnotes, a bibliography would also assist readers. 

Since 2002 Jain has been Professor of Accounting and Finance at Georgetown University, Washington DC, and with this book sets out to answer the question “why” (apparently, a question frequently asked by him as a child) Buffett is such a successful investor.  In the Acknowledgements he thanks his elementary school teachers in a small Indian town for the benefits flowing from the education they gave him.  All earnings from the book will be donated to children’s education.

Owen Davis is a member of the AIA.