I am currently reading and summarizing Warren Buffett’s partnership letters to his partners from his early partnership. What is interesting about his letters to his partners is that these letters were written before Buffett was known in the investment world as a great investor. He was 25 years old when he started the partnership and he was managing the equivalent of less then 1 million dollars in 2010 dollars. At the time he started the partnership he had just finished spending 2 years in NYC working for his famous Columbia Business School teacher, Ben Graham.

There are a lot of myths about how Buffett invested in his early days. His partnership letters help shed some light on what sort of investments he was making at the time.  His early and relatively unknown partnership letters are especially important for many at home, do it yourself, investors. Because let’s face it, most of us are investing less than 1 million dollars, just like Buffett when he first started, but he eventually because the richest man in the world. To many “home gamers” these letters are important because unlike the berkshire Berkshire Hathaway letters of today, Buffett wasn’t managing billions of dollars. And he wasn’t causing the prices of stock to move up or day simply because he was buying or selling stock. Simply put, when these letters were written Buffett was just like most of us, but then he began growing his money…

Warren Buffett’s Value Investing approach to his first million dollars and beyond – The Buffett Partnership Letters

In his now famous letter, the Super Investors of Graham Doddsville, Buffett admits the success of his investment partnership, which was operational over the course of 1957 to 1969. The partnership returned 29.5% annually, limited partners received a compounded return of 23.8% annually. The difference between the two (general partnership and limited partnership) is mainly the management fees (the amount Buffett got to keep for helping to make his investors rich).  During the same amount of time the Dow Jones returned 7.4% annually. This means that before Buffett took a portion of the profits for managing the portfolio, he was able to beet the stock market by 22.1% every year!

Here are the annual results in table format.

I will be posting some super quick summaries of the key points of each of these letters but, if you want to read the letters yourself, they can be found here http://www.ticonline.com/buffett.partner.letters.html.