Warren E. Buffett

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Structure:

1. Valuation

a) Discuss what can be inferred from the changes in stock price for Berkshire Hathaway Ltd. and Scottish Power plc. on the announcement day of the acquisition? b) Assess the bid for PacifiCorp. Do you think the bid is a “fair” price?

2. Warren Buffett, the investor

a) Discuss how Buffett’s superior performance fits with the notion that financial markets are semi-strong form efficient. b) Discuss two aspects of Buffett’s investment philosophy that (seemingly) contradict conventional finance theory.

3. Ethics and social responsibility

Under the leadership of Warren Buffett, do you think Berkshire’s activities have always been ethical and socially responsible? (Note: Your response is not limited to the pre-2005 period.) If you were a highly ethical investor, would you invest in Berkshire Hathaway? Why or why not?

The focus is on Warren Buffett's value investing methods. The last slide on the lecture should give you an idea of the structure of the essay: 3 sections.

Section 1: with the valuation, you don't need to do your own valuation, however you do need to start with a rough estimate of Pacificorps value by either: looking at the comparables or quickly reading what the tax office valuation says the value should be. Then you need to discuss why Buffett might think Pacificorp is a good buy with respect to his value investing methods.  In other words, use the Pacificorp case an an example to contrast Buffet's value investment method with traditional CAPM/Markowitz Portfolio theory, and how Buffett, givne his position is able to add value to the companies he buys.

This should lead into section 2 where you discuss Buffett's investment philosophies (more contrasting here between value investment and finance 101, pretty straightforward).

Then for section 3, you need to find a few interesting cases where Buffett may or may not have been socially responsible and whether its a big enough concern to deter investment...
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