Corporate Finance and Investing Summary and Analysis

Buffett's purchase of Washington Post Company in 1973 is an example of Ben Graham's investing principles. Security analysts and Buffet estimate company's intrinsic business value between $400 and $500 million. Washington's stock market value is $100 million. Ironically, the popular acquisition theory in mid-1970s relies on stock market value and ignores intrinsic business value. Key principles of Graham's that Buffett practices is to buy good businesses when the market discounts underlying business value. Popular theory is that the market is totally efficient at pricing investment. Buffett buys Washington Post's $400 million intrinsic business value for its market efficient price of $100 million.

Buffett and Munger buy public companies on the stock market like they buy private companies. They consider economic prospects of the business, its management, and its asking price like business analysts. An active trading market provides a flow...