Dea r Ma’am

As discussed in our last meeting with you regarding my children Reyaansh Sharma
and Yashika Sharma fee concession application, you had mentioned to provide
documents in support of this.

PREFACE
### Important Highlights

1. **Training at Legg Mason (June 1984)**:

- Enrolled in a training program at Legg Mason Wood Walker in Baltimore, focusing
on investing, market analysis, compliance, and selling techniques.
- The emphasis was on value investing, following works by Benjamin Graham and
David Dodd.

2. **Value Investing Approach**:

- Trainees were taught to avoid popular growth stocks and focus on companies
with low price-to-earnings and price-to-book ratios, high dividend yields, and long
periods of market underperformance.

3. **Introduction to Warren Buffett (1983 Annual Report)**:

- The pivotal moment occurred upon reading Berkshire Hathaway's 1983 annual
report, specifically Warren Buffett’s Chairman’s Letter.
- The letter described businesses, the people who ran them, and the economics
behind the operations, transforming the author’s understanding of investing from
focusing solely on numbers to considering the underlying businesses.

4. **Change in Perspective**:
- After reading Buffett’s letter, the companies represented by numbers gained life,
muscle, and purpose, shifting focus from spreadsheets to understanding the
businesses behind the numbers.

5. **Investment Strategy Post-Training**:

 - The author began investing in Berkshire Hathaway and the companies within its
portfolio, following Buffett’s investment breadcrumbs and studying them closely.

6. **Learning from Buffett’s Writings**:

- The extensive reading of Berkshire’s annual reports, articles about Buffett, and
annual reports of companies Berkshire invested in provided a deeper understanding
of Buffett’s investment philosophy.

7. **Buffett’s Investment Approach**:

- Buffett uses a consistent approach for evaluating both public and private
companies: focusing on the business, the management, the economics, and the
intrinsic value of the company.
- This approach was distilled into four categories of tenets: business,
management, financial, and market tenets.

8. **Motivation for Writing *The Warren Buffett Way***:

- The book aimed to uncover and document the investment methodology that
Buffett followed, using the companies he bought for Berkshire Hathaway as case
studies.

9. **Buffett’s Philosophy on Investing**:

- "It’s not necessary to do extraordinary things to get extraordinary results." This
insight implied that with the right approach, Buffett’s methods could be applied by
other investors.

10. **Challenges and Skepticism**:

- Some skeptics argue that despite reading about Buffett, one cannot replicate his
results, but the book's purpose was to offer tips to improve investment strategies
rather than guarantee Buffett-level returns.

11. **Enduring Investment Principles**:

- Buffett's advice remains relevant even amidst changing markets. His principles
focus on buying a part interest in understandable businesses with earnings likely to
grow materially over time.
12. **Buffett's Key Lesson (1996 Annual Report)**:
- "Your goal as an investor should be simply to purchase, at a rational price, a part
interest in an easily understood business whose earnings are virtually certain to be
materially higher, five, ten, and twenty years from now."

**Key Points:**
A FIVE SIGMA EVENT
1. **Buffett’s Philanthropy Announcement (2006):** Warren Buffett decided to give
away his fortune in Berkshire Hathaway stock, changing his original plan. He
announced the donation on June 26, 2006, pledging over $30 billion to the Bill and
Melinda Gates Foundation, in addition to $6 billion to other charitable foundations,
including his children’s.

2. **Reason for the Decision:** Buffett originally intended to leave his fortune to his
own foundation, managed by his late wife, Susan. After her passing, he recognized
that the Gates Foundation was better equipped to handle the large-scale
philanthropy.

3. **Rational Approach:** Buffett’s choice reflected his pragmatic nature; he

acknowledged that the Gates Foundation could use his donation more effectively
due to its established infrastructure.

4. **Impact of His Wealth:** Buffett attributed his success to being born in the right
place and time, lucky genetics, and the power of compound interest, while noting
the disparities in how society rewards different professions.

5. **Self-Made Destiny:** Despite attributing his wealth to luck, the narrative

suggests that Buffett’s skill and efforts were pivotal in creating his fortune.

**Summary:**
In 2006, Warren Buffett, then the world’s second-richest person, announced a
historic philanthropic pledge of over $30 billion to the Bill and Melinda Gates
Foundation. This marked a shift from his previous plan to leave his fortune to his
own foundation. Buffett rationalized that the Gates Foundation was already
equipped to handle large-scale donations, unlike his own. He acknowledged that his
wealth was partly due to luck but underscored his role in actively shaping his
destiny through shrewd investing.
Personal History and investment beginnings
### Key Points:
- **Early Life and Fascination with Numbers**: Warren Buffett was born on August
30, 1930, in Omaha, Nebraska. Even as a young child, he demonstrated a
fascination with numbers, which eventually extended to money and investments.
He showed entrepreneurial spirit early, selling gum, soda, and magazines door-to-
door, and later invested in his first stock at age 11.

- **Impact of the Great Depression**: The Great Depression affected Buffett's

family, causing his father to lose his job, but Howard Buffett soon bounced back by
starting his own brokerage. This experience left a lasting impression on Warren,
motivating his drive to become wealthy.

- **Early Investment Ventures**: At age 11, Buffett made his first stock purchase,
learning a valuable lesson about patience when he sold his shares too early. By high
school, he was already engaging in entrepreneurial ventures, such as running
pinball machines in local barber shops.

- **College and Shift to Investing**: Buffett attended Wharton but found the
academic approach to finance unsatisfactory. He transferred to the University of
Nebraska, graduating at age 20. Buffett was deeply influenced by Benjamin
Graham’s book, *The Intelligent Investor*, leading him to study under Graham at
Columbia University.

- **Mentorship under Benjamin Graham**: Buffett excelled in Graham's class at

Columbia, learning the principles of value investing, which would shape his future
approach to stock picking. Although initially turned down for a job at Graham's firm
due to non-financial barriers, Buffett eventually joined Graham-Newman in 1954.

- **Starting His Own Partnership**: After Graham retired in 1956, Buffett returned to
Omaha and began a limited investment partnership, leveraging the knowledge
gained from his mentor. He was just 25 years old.

### Summary:
Warren Buffett's early life set the stage for his future in investing. From an early
age, he demonstrated a knack for numbers and an entrepreneurial spirit, which
persisted despite the economic challenges of the Great Depression. His early
investment experiences, coupled with his education under Benjamin Graham, gave
him a solid foundation in value investing. By the time he was 25, Buffett had
launched his own investment partnership, marking the beginning of his journey to
becoming one of the world's greatest investors.

The Buffett Partnership Ltd.

Here are the key points from the passage:

1. **Early Partnership Structure (1956)**: The Buffett Partnership started with seven
limited partners contributing $105,000, while Buffett himself invested $100. The
partnership terms gave limited partners a 6% annual return plus 75% of profits
above that, with Buffett taking 25%. The goal was to outperform the Dow Jones by
10 percentage points.

2. **Investment Strategy**: Buffett focused on value investing based on Benjamin

Graham’s principles. The partnership initially bought undervalued stocks and
engaged in merger arbitrage to create risk-free profits.

3. **Early Success (1957–1961)**: The partnership outperformed significantly,

gaining 251% compared to the Dow's 75%, with Buffett beating his target of 10
percentage points, averaging a 35-point lead over the Dow.

4. **Partnership Growth and Reorganization (1962)**: As Buffett’s reputation grew,

so did the number of investors. He consolidated multiple partnerships into a single
entity and moved the office to Kiewit Plaza in Omaha.

5. **American Express Investment (1963)**: During the "salad oil scandal,"

American Express shares plummeted by 50%. Buffett observed consumer behavior
and concluded the scandal didn’t affect the brand’s fundamentals. He invested 25%
of the partnership’s assets ($13 million) in American Express, resulting in a profit of
$20 million over two years.

6. **Transition to Business Ownership**: Initially focused on undervalued stocks and

merger arbitrage, Buffett began purchasing controlling interests in businesses,
including Dempster Mill and Berkshire Hathaway.
7. **Shift in Market Dynamics (1960s)**: The stock market saw a shift towards
growth stocks, leading to the "Go-Go" years. Despite this, Buffett’s partnership
continued to outperform, with gains of 1,156% versus the Dow’s 123% by 1966.

8. **Dissolution of the Partnership (1969)**: Buffett decided to disband the

partnership due to the speculative market environment and scarcity of worthwhile
investment opportunities. At this point, he had outperformed the Dow by 22
percentage points annually from 1957 to 1969.

9. **Transition After the Partnership**: When the partnership ended, investors were
compensated either in cash or Berkshire Hathaway shares. Buffett's portion had
grown to $25 million, enough to gain control of Berkshire Hathaway.

10. **Future Growth**: Despite doubts about Buffett’s future success post-
partnership, the disbandment marked the beginning of a new phase where he
focused on Berkshire Hathaway, setting the stage for his later achievements.

### Summary:
Warren Buffett's partnership, established in 1956, achieved remarkable returns by
focusing on value investing and merger arbitrage. Buffett outperformed the Dow
consistently, but as market dynamics shifted in the 1960s toward growth stocks, he
chose to dissolve the partnership in 1969, preferring a conservative approach he
understood over speculative trends. He then focused on building Berkshire
Hathaway, marking a new phase in his investment career.

Berkshire Hathaway
Here are the key points from the passage:

1. **Origins of Berkshire Hathaway**:

- The company began as Berkshire Cotton Manufacturing in 1889.
- It grew by merging with other textile mills and became one of New England's
largest industrial companies, producing 25% of the nation's cotton needs.
- In 1955, Berkshire merged with Hathaway Manufacturing, changing its name to
Berkshire Hathaway.

2. **Post-Merger Struggles**:
 - Following the merger, the company's performance deteriorated, with
stockholders' equity halving and operational losses exceeding $10 million.
- Buffett and Ken Chace worked hard to turn the textile operations around, but
returns on equity remained low.

3. **Buffett's Approach to the Textile Business**:

- Despite the challenges, Buffett maintained the textile operations because they
were significant employers, the workforce had specialized skills, management was
enthusiastic, unions were cooperative, and some profits were possible.
- However, he was clear that capital investment would only be made if there were
prospects of positive returns.

4. **Challenges in the Textile Industry**:

- By the 1980s, it was evident that the nature of the textile business made high
returns on equity unlikely due to commoditization, foreign competition with cheaper
labor, and the need for costly capital improvements.
- Buffett faced a dilemma: reinvesting to remain competitive would likely result in
poor returns, while not reinvesting would weaken the company's position against
competitors.

5. **Closure of the Textile Business (1985)**:

- Signs of the textile group's decline were apparent by 1980, as it lost prominence
in Berkshire's annual report.
- In July 1985, Buffett decided to close the textile division, ending a century-long
business.

6. **Lessons Learned**:
- Buffett realized that corporate turnarounds are rarely successful.
- Despite the textile group's challenges, it did generate enough early capital to
allow Berkshire to purchase an insurance company, which became a more lucrative
part of the business.

### Summary:
Berkshire Hathaway's roots trace back to 1889, evolving into a significant textile
company. Post-1955 merger struggles led to poor financial performance despite
Buffett's efforts to revive the business. The inherent challenges in the textile
industry, including commoditization and foreign competition, ultimately led to the
closure of the textile operations in 1985. The experience taught Buffett the difficulty
of turnarounds, but the capital generated early on helped Berkshire enter the
insurance industry, setting the stage for future success.

Insurance Operations
Here are the key points from the passage:

1. **Entry into Insurance (1967)**:

- Berkshire Hathaway purchased National Indemnity Company and National Fire &
Marine Insurance for $8.6 million.
- This acquisition marked the beginning of Berkshire Hathaway's success,
providing a steady stream of cash from insurance premiums for investments.

2. **Value of Insurance Companies**:

- Insurance companies collect premiums, generating a cash flow used to invest in
liquid securities until claims are filed.
- In 1967, the companies had a combined bond and stock portfolio worth over $32
million, which grew significantly within two years.

3. **Insurance as a New Investment Vehicle**:

- Insurance companies, like textiles, face competition and commoditization.
However, they offer potential advantages through effective management.
- Buffett's insurance acquisitions included GEICO and later, General Re, making
insurance a core part of Berkshire's operations.

4. **GEICO Acquisition**:
- Buffett gradually increased his stake in GEICO, eventually acquiring full
ownership in 1996 for $2.3 billion.
- The acquisition added to Berkshire's growing insurance portfolio.

5. **Addition of Ajit Jain**:

 - Ajit Jain was hired to manage the Berkshire Hathaway Reinsurance Group,
significantly expanding its float (unpaid premiums).
- Jain's expertise in insuring unique risks contributed greatly to Berkshire's
success, making him an indispensable part of the company.

6. **Buffett's Leadership Style**:

- Warren Buffett is known for his straightforward, honest, and down-to-earth
management style.
- Berkshire Hathaway's structure reflects Buffett's investment philosophy, with
major divisions in insurance, capital-intensive businesses, and various
manufacturing and retail operations.

7. **Growth of Berkshire Hathaway (1965–2012)**:

- Since Buffett took control in 1965, the company’s book value grew from $19 to
$114,214 per share, achieving an annual compounded growth rate of 19.7%.
- The company’s investment portfolio increased from $3 billion to $87.6 billion
over 25 years.

8. **Efficient Market Theory and Buffett's Performance**:

- Despite the efficient market theory suggesting all information is already
reflected in stock prices, Buffett's consistent success challenges this notion.
- Some consider Buffett's achievements a rare statistical phenomenon, while
Buffett himself believes that achieving extraordinary results does not require
extraordinary actions.

### Summary:
Berkshire Hathaway's transformation began in 1967 with the acquisition of two
insurance companies, providing Buffett with a powerful investment vehicle.
Insurance became central to Berkshire's strategy, with major acquisitions like GEICO
and skilled leadership from Ajit Jain driving growth. Buffett's straightforward
management style and investment philosophy, coupled with his ability to navigate
commoditized industries like insurance, fueled Berkshire's significant expansion
from 1965 to 2012. His investment success challenges the efficient market theory,
suggesting that consistent, methodical investing can indeed outperform market
averages.
1. Real Estate:
a. Golf village flat (send all docs to Saurabh) - Monday
b. Golf village flat clearance - Tuesday
c. Buy new property – DLF, MRG crown, Old Gurgaon, Sarojini nagar –
Monday/Tuesday
d. BPTP status – Tuesday/Wednesday

2. Health related
a. Health insurance – Monday
b. Eye check up for all – Monday or Tuesday
c. Health checkup - Monday
d. Echocardiography test – During the week

3. Banking
a. NRE/NRO accounts for self and Gauri (also talk to DBS bank)
b. PNB – netbanking and PNB One app – Monday/Tuesday
c. ICICI prolife phone number change
d. Max life investment management
e. Apply for Pan card/Pan card update
f. Change phone number in Adhaar card

4. Financial investments
a. Talk to Motilal Oswal and Angel One broking for investment
management services - Monday
b. Talk to Nitish’s brother – Monday/Tuesday
c. Stockholding – Give Gauri papers, apply for online trading and
becoming a business associate – Monday/Tuesday