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.