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Obviously, the headline is a joke. I don’t know if anyone keeps track of how many silly “Invest Like Warren Buffet” articles come out every day, but i bet this one isn’t even in the first 100.

However, he knows how to invest. And while home over Christmas I couldn’t help but notice a dusty 1951 vintage copy of Graham and Dodd’s “Security Analysis” on an old out of the way shelf.

image

Plain green cover and generic title aside, these two Columbia biz school profs are credited by Buffet himself as the reason he attended Columbia (besides the fact he was rejected by Harvard). So what wisdom can this book contain for us in the year 2015? Let’s take a look:

image

First impression? Apparently railroads were a lot more important in 1951 than they are now, due to the large portion of the book dedicated to them. But, hey, railroads have been in the news lately due to low oil prices, so let’s read on.

image

What’s interesting is the 8.5% net income margin shown here on our FY 1949 income statement for Chicago, Burlington & Quincy is good, but still less than half of the eye popping 20% margin delivered (no pun intended) by Union Pacific (UNP) just last year. In fact, looking at the 9 railroads we have data for, seven had net income margins in the double digits in 2013:


image



What’s the take away? Well, Warren Buffet bought Burlington Northern Santa Fe in 2010. Apparently he has kept this book close all these years. Maybe we should too?


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