Making Better Investment Decisions, August 21, 2008
By R. M. Mayhew (St. Louis, MO USA) - See all my reviews


The next best thing to getting stock suggestions from Warren Buffett is to understand the thinking process he and Charlie Munger use to make their investment decisions at Berkshire Hathaway. The Four Filters condenses an incredible amount of information on the Buffett and Munger thinking process into a very readable and undertandable format. The Filters are essentially a checklist of criteria which are used at Berkshire Hathaway to sort through thousands and thousands of available investment options and then hone in and analyze the remaining candidates in more detail. If you'd like to think like Buffett and Munger, this well-crafted treatise will certainly help you.

The Four Filters Invention of Warren Buffett and Charlie Munger by Bud Labitan
By Alexg on June 16, 2008

First of all, before I received this book I knew it would have to be really special in order for the book to receive a 10 out of 10. Value Investing is a subject that is constantly written about and any new book would really have to be unique in some sort of way to really make an impact on someone who is constantly reading about it. With that in mind, I would like to break down the review into sections, Presentation, Content, Readability, and Commentary.

Presentation
Apparently, Bud had an offer to have the Four Filters published but the publisher wanted to make changes that bud was not too fond of and so Bud decided to publish the book
himself.

Spiral Bound Version Comments
Upon receiving the package, I was a bit surprised as to how the book was presented. It looks like a college research paper which has its positives and negatives. The negatives, the obvious being it does not look professional. In addition, it does not fit in very well if I set it in my library. I found several small errors but nothing too big that will take the value of the book to zero. On the other hand, the material was easy to read with Bud using regular 12 pt. Times New Roman Font. The tables of contents were clearly laid out in the beginning and were followed throughout the book. Overall, I liked the presentation. Although it the book might not look too good in my library, Bud’s willingness to stand up for his work more than makes up for the minor nuisances. Plus, I will take a. easy to read book that is not published over a published book that I have to squint my eyes to read the pages any day. Overall grade on presentation B-.

Content
Now for the meat of the book, the content. Regular readers of Value Investing will nothing new hear. Throughout the book, bud points out Warren Buffett and Charlie Munger’s “Four Filter” system that will eliminate inferior investments and filter out quality investments that will provide both good returns with little downside. The four filters as mentioned in the book are

1. An understandable business
2. Competitive Advantage
3. First Class Management
4. Available At Bargain Prices

Filled with numerous quotes and historical references Bud makes his case on how the four filter system came about and how Warren Buffett are implementing it today. I found several new quotes in the book that I have not seen such as Charlie Munger calling EBITDA “Bullshit Earnings” and Bud’s S.O.A.P process on how to evaluate management. It is obvious Bud did his homework. Nevertheless, a novice investor looking to start out on the right foot will benefit from Bud’s work. The quotes were approved by Warren Buffett and are integrated well into the book. I will try not to give away too much from the book, but Bud does a heck of a job in analyzing Kraft using the four filter system. The book could have been further expanded by adding more examples of the four filter system and possibly expanding certain chapters such as the chapter on management. Overall Grade, B. Nothing unique but the implementation of quotes was great and author did due his due diligence.

Readability
Bud’s style of writing is easy to read and no one should have a problem implementing the four filters. Bud went straight to the point and made his ideas very clear. Overall, A.

Commentary
As mentioned above the book will not be a huge eye opener to someone who constantly reads material on value investing. The book will get someone started in value investing on the right foot.