Some of the best sources of investing and business wisdom I came across so far are the Warren Buffett’s annual Letters to shareholders of Berkshire Hathaway Inc. Here I have put together a little series extracting the pieces I found most interesting and applicable to anyone’s investment strategy.

Golden Ideas from 1977 Berkshire Hathaway Inc. Letter to shareholders (part 1/3)

• Importance of being in business where tailwinds prevail rather than headwinds

Positions yourself in „…the business where some mistakes can be made and yet a quite satisfactory overall performance can be achieved“. This is hard to achieve in some industries as „…this is the opposite case from our tectile business where even ver good management probabaly can average only modest results.“

• Keeping the level of profit margins even for a cost of reduced volumes

Talking about insurance industry however this can be applied in business in general where „…as markets loosen and rates become inadequate, we again will face the challenge of philosophically accepting reduced volume. Unusual managerial discipline will be required, as it runs counter to normal institutional behavior to let the other fellow take away business – even at foolish prices.“

Source: http://berkshirehathaway.com/letters/1977.html

This entry was posted on Monday, December 25th, 2006 at 3:10 pm and is filed under Warren Buffett. You can follow any responses to this entry through the RSS feed. You can leave a response, or trackback from your own site.