Subject: A 21 year old pundit
I use the term 'pundit' as that is likely how many around him would have observed Warren Buffett, as he wrote this article aged 21. But his mental processes were far from that of a speculator. He wrote the following article about the merits of purchasing GEICO which was published in the following newspaper in 1951:

https://blogger.googleusercont...

What is first striking is how extremely specific and detailed his observations are about the auto-insurance industry. Buffett had read The Intelligent Investor merely 1 year earlier in 1950, but it would be another 3 years away, in 1954, when Buffett would start to work for Ben Graham.

At this earlier time, in 1951, the 21 year old Warren Buffett was putting half is net worth into GEICO following his conviction of projecting enormous growth ahead that was not being factored into the stock price at 8 times depressed earnings. Although, in 1950 this amounted to a little more than $10,000, and he did exit at various times, and then entered in a big way during the 1970s - more than 20 years after this article was published. If you think love affairs should be short-lived and only during an brief opportune time, think again. The right company can grow, and then grow.

How much of his excellent prediction was based on his specific knowledge of the industry, and how much was based on his capacity to see the pricing as irrational and to give almost no respect towards the notion of pricing efficiency (largely, cemented in his readings of Ben Graham) and having the patience? Certainly it is a mixture of the two, but likely the latter was what differetiated Buffett from other investment analysts with perhaps similar knowledge of the industry, even if the insights are somewhat less penetrating as Buffett's.

Buffett is incorrectly viewed as, almost in a binary sense, having been not particularly interested in high quality growth companies early in his career, but this cliche is highly contradicted here. Throughout all of his commentary about GEICO, Buffett related to the enormous growth ahead, noting his enormous concentration in the stock at the time.

What lessons can we learn from this article as we look upon opportunities today? Certainly, you need to have insight as to how the industry surrounding you business of interest functions, and in parallel you must understand the peculiarities of the individual business. Only with these conditions passed, you need to be prepared to ignore a lot of opportunities until you can find one or two that are quoted exceedingly below the likely value of the business ten, or fifteen, years into the future.

- Manlobbi