Reading the Letter to Partners of Buffett Partnership 11 Feb 1959

Thanks to my friend reminded me reading the great writings from Warren Buffett - Letter to Partners of the Buffett Partnership 1959 to 1969. This is the first reading notes which capture my thought when I gone through the letter.

As per his comment to general stock market in 1958, the bull/hot market will affect the finding of undervalued securities due to fast rising of price. I like the statement "I do believe that widespread public belief in the inevitability of profits from investment in stocks will lead to eventual trouble". In my opinion, this statement applicable to my belief to the current hot property market in Asia.

First, Buffett share his reasoning to purchase the largest holding of the partnership, Commonwealth Trust Co.:

1. The stock has intrinsic value $125 per share and earning $10 per share, with average purchase price $51 per share.
2. Unlocking value of stock in one to ten years, $250 per share.
3. Being a second largest shareholder have voting power on merger proposal.

What surprised me on Buffett writing to his partners was, he disclosed the intrinsic value and future unlocking value of the stock in his writing, that indicate that he was very clear, confident and certain about the intrinsic value and future unlocking value of the stock. Even with this great stock, he sold it for $80 per share due to finding a even better deal. Wow! That's indicate that Buffett always in the "finding great deal" mode, a great deal like Commonwealth Trust Co. would not make him sit and wait.

Buffett emphasized on importance of not having "Leakage regarding the partnership portfolio holdings". I know a investment manager who running investment partnership being very secretive and caution on sharing his partnership holdings, even to his partners. Buffett may well explain and support the behavior of the investment manager given the current stock market is easily accessible by retail investor. Was U.S stock market open to retail investor in 1958? (If you know the answer, kindly post your response to comment section)

Buffett further assured that replacement of Commonwealth Trust Co. which represents 25% of the partnership assets will perform better than Dow-Jones for the holding period. Again, he made the investment decision so certain and so convincing to his partners.

Lastly, he set a clear basis how he want to be judged:

An above average performance in a bear market or neutral market, and a normal performance in a bull market.

Would you use this basis to judge your investment manager if you have one?