More Praise for The Warren Buffett Way, First Edition

manent Value
(2004), 1362.
2. Berkshire Hathaway Annual Report, 1989, 5.
3. Berkshire Hathaway annual meeting, 1988, quoted in Kilpatrick, 
Of Per-
manent Value
(2004), 1330.
4. Jim Rasmussen, “Buffett Talks Strategy with Students,”
Omaha World-
Herald
( January 2, 1994), 26.
5. The f irst stage applies 15 percent annual growth for ten years, starting in
1988. In year one, 1988, owner earnings were $828 million; by year ten,
they will be $4.349 billion. Starting with year eleven, growth will slow to 5
percent per year, the second stage. In year eleven, owner earnings will equal
$3.516 billion ($3.349 billion 
×
5 percent
+
$3.349 billion). Now, we can
subtract this 5 percent growth rate from the risk-free rate of return (9 per-
cent) and reach a capitalization rate of 4 percent. The discounted value of a
company with $3.516 billion in owner earnings capitalized at 4 percent is
$87.9 billion. Since this value, $87.9 billion, is the discounted value of Coca-
Cola’s owner earnings in year eleven, we next have to discount this future
value by the discount factor at the end of year ten [1/(1
+
.09)10]
=
.4224. The
present value of the residual value of Coca-Cola in year ten is $37.129 bil-
lion. The value of Coca-Cola then equals its residual value ($37.129 billion)
plus the sum of the present value of cash f lows during this period ($11.248
billion), for a total of $48.377 billion.

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6. Berkshire Hathaway Annual Report, 1991, 5.
7. Berkshire Hathaway Annual Report, 1985, 19.
8. Berkshire Hathaway Annual Report, 1990, 16.
9. Berkshire Hathaway Annual Report, 1993, 16.
10.
Fortune
( December 19, 1988), quoted in Kilpatrick, 
Of Permanent Value
(2004), 1331.
11. Berkshire Letters to Shareholders, 1977–1983, 53.
12. Berkshire Hathaway Annual Report, 2001, 5.
13. Berkshire Hathaway Annual Report, 2001, 15.
14. Grace Shim, “Berkshire Hathaway to Buy Fruit of the Loom,” 
Omaha
World-Herald
(November 4, 2001).
15. Dean Foust, “This Trailer Deal Could Get Trashed,” 
BusinessWeek
(Sep-
tember 8, 2003), 44.
16. David Wells, “Buffett Says He Will Not Increase Bid for Clayton,” 
The Fi-
nancial Times,
USA ed. ( July 10, 2003), 19.
Chapter 9 Investing in Fixed-Income Securities
1. Berkshire Hathaway Annual Report, 2003.
2. Berkshire Hathaway Annual Report, 1988, 14.
3. Berkshire Hathaway Annual Report, 1990, quoted in Lawrence A.
Cunningham,
The Essays of War ren Buf fett: Lessons for Corporate Amer-
ica,
rev. ed. (privately printed ), 105.
4. Berkshire Hathaway Annual Report, 1990, 18.
5. Berkshire Hathaway Annual Report, 2002.
6. Berkshire Hathaway Annual Report, 2000.
7. Berkshire Hathaway Annual Report, 1988, 15.
Chapter 10 Managing Your Portfolio
1. Personal communication to author, August 1994.
2. Andrew Barry, “With Little Cheery News in Sight, Stocks Take a Break,”
Bar ron’s
(November 16, 1998), MW1.
3. Berkshire Hathaway Annual Report, 1993, 15.
4. Ibid.
5. Ronald Surz, “R-Squareds and Alphas Are Far from different Alpha-Bets,”
The Journal of Investing
(Summer 1998).
6. Interview with Warren Buffett, August 1994.
7.
Wall Street Journal
(September 30, 1987), quoted in Andrew Kilpatrick, 
Of
Permanent Value: The Stor y of War ren Buf fett
( Birmingham, AL: AKPE,
2004), 1328.

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8.