Reading the Letter to Partners of Buffett Partnership 10 Jul 1963

In the first half of 1963, the Dow advanced from 652.10 to 706.88, plus 10% (including dividends received), where Buffett Partnership achieving plus 14%, different 4%.

Buffett further highlight his thinking of relative results of investment performance in his writing:

At plus 14% versus plus 10% for the Dow, this six months has been a less satisfactory period than the first half of 1962 when we were minus 7.5% versus minus 21.7% for the Dow.

The objective of the partnership:

Our partnership's fundamental reason for existence is to compound funds at a better-than-average rate with less exposure to long-term loss of capital than the above investment media (largest open end funds and close-end investment companies). We can and do say that if we don't achieve this goal over any reasonable period, excluding on extensive speculative boom, we will cease operation.

Also, related to investment decision-making:

Investment decisions should be made on the basis of the most probable compounding of after-tax net worth with minimum risk.

Reading the Letter to Partners of Buffett Partnership 18 Jan 1963

In 1962, the Dow declined from 731 to 652, minus 7.6% (including dividends received), where Buffett Partnership achieving plus 13.9%, different 21.5%.

With the help of Harry Bottle, the partnership's "control" company - Dempster Mill Manufacturing Company improved adjusted value per share from $35 to $51. Three facts stand out:

1. Although net worth has been reduced somewhat by the housecleaning and writedowns ($550,000 was written out of inventory; fixed assets over-all brought more than book value), we have converted assets to cash at a rate far superior to that implied in our year earlier valuation.
2. We have converted the assets from the manufacturing business which has been a poor business, to a business which we think is good business -- securities.
3. By buying assets at a bargain price, we don't need to pull any rabbits out of a hat to get extremely good percentage gain.

I end this writing with the cornerstone of the partnership's investment philosophy:

Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results. 

Reading the Letter to Partners of Buffett Partnership 06 Jul 1962

In the first half of 1962, the Dow declined 21.7% from 731.14 to 561.28 (including dividends received), where Buffett Partnership achieving minus 7.5%, different 14.2%.

If you are evaluating the performance of your investment manager, let's me borrow a quote from Buffett:

Investment performance must be judged over a period of time with such a period including both advancing and declining markets.