The Warren Buffet Way This presentation, created by MAQ AGAPITO, CRISTINA BONGHANOY, MELISSA SUE BUETA, SARAH LOPEZ, and GEM GALUPAR from the Financial Management class at the Ateneo Graduate School of Business, focuses on the key principles and strategies outlined in "The Warren Buffett Way" book. It highlights Warren Buffett's investment philosophy, which emphasizes value investing and the importance of patience and discipline in the investment process. The presentation also explores how these strategies can be applied in the Philippine market, providing a local case study and examples to show how these principles can be adapted and applied successfully by Filipino investors. This collaborative effort aims to bridge the gap between global investment strategies and local market dynamics, offering valuable insights for both aspiring and seasoned investors in the Philippines. TSFINMAN R12 Ateneo Graduate School of Business

1. WARREN BUFFET
WAY
TS FINMAN R12
Prof. Raul Ruiz
AGAPITO | BONGHANOY | BUETA | GALUPAR | LOPEZ
THE

2. AN INTRODUCTION
PART 1
San Miguel Aerocity
SARAH MAE LOPEZ
THE WORLD’S GREATEST INVESTOR

3. WARREN
BUFFET
Moments that defined him

4. 01
02
03
WARREN BUFFET
Margin of Safety
Purchase shares when the overall market is trading at low prices
a.
Purchase the stock when it trades below its intrinsic value even
though the overall market is not substantially cheap
b.
Benjamin Graham (Quantitative Analyst)
Invest in companies with above average potential
Align oneself with the most capable management
Companies with potential to increase its intrinsic value over the long
term
Philip Fisher (Qualitative Analyst)
Helped Buffett appreciate the economic returns that come from buying
and owning great businesses
Helped educate Buffett on the psychological missteps that often occur
when individuals make financial decisions
Charlie Munger
Intellectual Influences

5. Note: As of Q2, 2023
WARREN BUFFET’S PORTFOLIO
Berkshire Hathaway Total Portfolio Value: $344B

6. 01
02
03
04
05
06
A Five-Sigma Event: The World’s Greatest Investor
The Education of Warren Buffet
Buying a Business: The Twelve Immutable Tenets
Common Stock Purchases: Nine Case Studies
Portfolio Management: The Mathematics of Investing
The Psychology of Investing
07 The Value of Patience
08 The World’s Greatest Investor

7. KEY PRINCIPLES
PART 2
EY Global Delivery Services
MELISSA SUE BUETA
BUFFET’S WAYS AND PHILOSOPHIES
PrimeWater Infrastructure Corp
CRISTINA C. BONGHANOY
Illo’s Group, Inc.
MARK AGAPITO

8. THE 12 TENETS
Simple & Understandable
Consistent operating history
Favourable long-term prospects
BUSINESS
Estimate intrinsic value
Buy at a discount
MARKET
Focus on ROE not EPS
Owner's earnings
High profit margins
One dollar test
FINANCIAL
Rational in capital allocation
Candid with its shareholders
Resist institutional imperative
MANAGEMENT

9. BUSINESS TENETS
Is the business simple
and understandable?

10. BUSINESS TENETS
Does the business have a
consistent operating history?

11. BUSINESS TENETS
Does the business have
favorable long-term prospects?

12. Is management
rational?
MANAGEMENT TENETS

13. Is management candid
with shareholders?
MANAGEMENT TENETS

14. Does management resist the
institutional imperative?
MANAGEMENT TENETS

15. FINANCIAL TENETS
Focus on ROE
Earnings per
share (EPS)
Return on
Equity (ROE)
Portion of a company’s profit
allocated to each outstanding
share of common stock.
Ratio of operating earnings to
shareholders’ equity

16. FINANCIAL TENETS
Calculate Owner Earnings
Net Income + D&A - CAPEX
“I would rather be
vaguely right, than
precisely wrong.”

17. FINANCIAL TENETS
Look for Company with
High Profitability
Sales Profit
Cut Expenses!

18. FINANCIAL TENETS
The One Dollar Premise
For every dollar retained, has the company
created at least a dollar of market value?
Return Value

19. MARKET TENETS
Determine the Value of Business
Value = Net Cash
Flow discounted at
appropriate
discount rate
Estimating future
cash flows with
certainty
US Gov’t Bond as
the Discount Rate
Discounted Cash
Flow Calculations
Growth VS Value
Investing

20. MARKET TENETS
Buy at Attractive Prices
Intrinsic Value - Price = MARGIN OF SAFETY
Protection Potential for
High return

21. PSYCHOLOGY OF
INVESTING
Key principles learned from
“Behavioral Finance” which primarily
tackles the irrationalities, illogical
assumptions, and foolish mistakes
investors make in their investment
decisions and financial affairs.

22. BAD INVESTOR 101:
THE EMOTIONAL TRAPS AND VULNERABILITIES
Overconfidence Overreaction Bias
tendency of investors to
overestimate their skills
and knowledge resulting to
errors in judgment
investors tend to overreact
to bad news and slowly
react to good news
Loss Aversion
pain of loss > enjoyment of a gain
investors avoiding to confront
failures
tendency to hold on losing stocks
to preserve their opinion of their
investment decision with hope
that things will turn differently

23. BAD INVESTOR 101:
THE EMOTIONAL TRAP AND VULNERABILITIES
Mental Accounting Myopic Loss Aversion
it is a behavioral concept
that describes the habit of
people in assigning
financial outcomes based
on their perception of
money
combination of loss
aversion and frequency
investors constantly
checking their stocks in
shorter periods of time
making them less attractive
to volatile stocks
The Lemming Factor
tendency to follow the
majority
safe, conservative and
adherence to the stands >
independent thinking

24. THE VALUE OF
PATIENCE
"The stock market is a device for
transferring money from the
impatient to the patient."
- Warren Buffett
The key highlights include the
importance of rational thinking,
cognitive systems, mindware gap
and the value of time and
patience to attain investment
success.

25. RATIONALISM
“rationality is not the same
as intelligence”
ability to think clearly,
sensibly and logically
opinions and actions
based on reason than
emotional response
SLOW MOVING IDEAS
basis for long-term investing
not intellectually difficult to grasp, but is is more
laborious than relying on the “straightfoward
and obvious”
SYSTEM RISKS
Two modes of thinking:
(1) System 1 - “simple and straightforward”
(2) System 2 - “reflection, judgment and special
expertise”
THE MINDWARE GAP
the secondary cause of “dysrationalia,” refers
to content deficiency
a person can learn that extends the person’s
general power to think critically and creatively

26. WARREN BUFFET AS AN INVESTOR
Rational Thinker and Emotionally stable
Unwavering Patience (with long-term focus)
Instead of short term-gains, he focuses on long-term value identifying companies
that are undervalued and selling them years after they achieve their deserved
market value (Ex. Apple. Amazon, etc.)
aka “value investing”
He has the ability to detach himself from herd mentality and stays level-headed with
price fluctuations, making decisions based on reason rather than emotion
With absent rationality, investors become enslaved to basic emotions of fear and greed
Commitment to “Value-Investing”
Instead of short term-gains, he focuses on long-term value identifying companies that
are undervalued and selling them years after they achieve their deserved market value
(Ex. Apple. Amazon, etc.)

27. PHILIPPINE SETTING
PART 3
BDO
GEM GALUPAR
AN INVESTOR’S PRACTICAL APPLICATION

28. POV: FILIPINO STUDENTS OF BUSINESS OR
FINANCIAL MANAGEMENT
PHILIPPINE
SETTING
AN
INVESTOR’S
PRACTICAL
APPLICATION
POV: INVESTORS AND INVESTMENT COMMUNITY
POV: COMPANY ANALYSIS

29. POV: FILIPINO STUDENTS OF BUSINESS OR
FINANCIAL MANAGEMENT
PHILIPPINE
SETTING
AN
INVESTOR’S
PRACTICAL
APPLICATION
Investment strategies and approaches are taught based
on best practice discipline. Some of Warren Buffet’s ways
are applicable, but some may change the students'
perspective.
One of the samples of practical application would be the emphasis on
Fundamental Analysis’ focus on Bottom-UP Approach

30. POV: INVESTORS AND INVESTMENT
COMMUNITY
PHILIPPINE
SETTING
AN
INVESTOR’S
PRACTICAL
APPLICATION
Investment strategies and approaches heavily affect
investors' investment activities, like the preference and
aid of the Philippine Stock Exchange. Warren Buffet’s
ways to turn off the stock market means the stock
exchange is a guide only but not the sole basis of
investment decisions.
Technical Analysis

31. POV: COMPANY ANALYSIS
PHILIPPINE
SETTING
AN
INVESTOR’S
PRACTICAL
APPLICATION
Investment strategies and approaches are taught based
on best practice discipline. Some of Warren Buffet’s ways
are applicable, such as the company performance
analysis.

32. POV: COMPANY ANALYSIS
PHILIPPINE
SETTING
AN
INVESTOR’S
PRACTICAL
APPLICATION
Investment strategies and approaches are taught based
on best practice discipline. Some of Warren Buffet’s ways
are applicable, such as the company performance
analysis.

33. POV: COMPANY ANALYSIS
PHILIPPINE
SETTING
AN
INVESTOR’S
PRACTICAL
APPLICATION
Investment strategies and approaches are taught based
on best practice discipline. Some of Warren Buffet’s ways
are applicable, such as the company performance
analysis.

34. POV: COMPANY ANALYSIS
PHILIPPINE
SETTING
AN
INVESTOR’S
PRACTICAL
APPLICATION
Investment strategies and approaches are taught based
on best practice discipline. Some of Warren Buffet’s ways
are applicable, such as the company performance
analysis.

35. POV: COMPANY ANALYSIS
PHILIPPINE
SETTING
AN
INVESTOR’S
PRACTICAL
APPLICATION
Investment strategies and approaches are taught based
on best practice discipline. Some of Warren Buffet’s ways
are applicable, such as the company performance
analysis.

36. POV: COMPANY ANALYSIS
PHILIPPINE
SETTING
AN
INVESTOR’S
PRACTICAL
APPLICATION
Investment strategies and approaches are taught based
on best practice discipline. Some of Warren Buffet’s ways
are applicable, such as the company performance
analysis

37. PHILIPPINE
SETTING
AN
INVESTOR’S
PRACTICAL
APPLICATION
Warren Buffet’s ways in the practical application to the Philippine
setting is analyzing the performance of businesses in the
Philippines through understanding their strategies, financial
scorecards, nature and conduct of operations, source of income
streams, and historical performance, among other things.
The investor's mindset is to buy a business and not a stock.

38. THANK
YOU
AGAPITO | BONGHANOY | BUETA | GALUPAR | LOPEZ

39. GROUP 3