1958年至股东信（翻译中）

### 1958 Letter

### Warren E Buffett

### 5202 Underwood Ave. Omaha, Nebraska

#### THE GENERAL STOCK MARKET IN 1958

A friend who runs a medium-sized investment **trust** recently wrote: “The **mercurial** **temperament**, characteristic of the American people, produced a major transformation in 1958 and ‘**exuberant**’ would be the proper word for the stock market, at least”.

I think this summarizes the change in psychology **dominating** the stock market in 1958 at both the **amateur** and professional levels. During the past year almost any reason has been **seized** upon to **justify** “Investing” in the market. There are undoubtedly more mercurially-tempered people in the stock market now than for a good many years and the **duration** of their stay will be limited to how long they think profits can be made quickly and effortlessly. While it is impossible to **determine** how long they will continue to add numbers to their ranks and thereby **stimulate** rising prices, I believe it is **valid** to say that the longer their visit, the greater the reaction from it.

I make no attempt to forecast the general market – my efforts are **devoted** to finding undervalued securities. However, I do believe that widespread public belief in the **inevitability** of profits from investment in stocks will lead to **eventual** trouble. Should this occur, prices, but not intrinsic values in my opinion, of even undervalued securities can be expected to be substantially affected.

#### 1958 年股市情况

一位管理着中等规模投资信托的朋友最近在信中提到：“美国人那种典型的多变的特性在1958年发生了重大转变，用‘狂热’来描述当年的股市或许更为恰当”。

我认为这句话很好地概括了 1958 年股市投资者的心理变化，不管是普通投资者还是专业人士都受到了影响。在过去一年中，人们几乎抓住一切机会来为投资股市找理由。显然，现在股市中情绪化的投资者比往年更多，他们在股市中停留的时长将取决于他们认为能够多快且不费力地获得收益。尽管我们无法预知这种情绪化投资的热潮将持续多久，但可以肯定的是，这种趋势持续得越久，最终可能引发的市场反应也会越激烈。

我不预测股市的走势——只专注于寻找低估的股票。然而，我确实担心，公众普遍认为投资股票就能稳赚不赔的观念，最终可能会引发问题。如果这种情况真的发生，股价，即使是那些低估的股票，他们的价格都会受到巨大的影响，但是它们的内在价值不会因此而改变。

### RESULTS IN 1958

In my letter of last year, I wrote:

“Our performance, relatively, is likely to be better in a bear market than in a bull market so that deductions made from the above results should be **tempered** by the fact that it was the type of year when we should have done relatively will. In a year when the general market had a substantial advance, I would be well satisfied to match the advance of the averages.”

The latter sentence describes the type of year we had in 1958 and my forecast worked out. The Dow-Jones Industrial average advanced from 435 to 583 which, after adding back dividends of about 20 points, gave an **overall** gain of 38.5% from the Dow-Jones unit. The five partnerships that operated throughout the entire year obtained results averaging slightly better than this 38.5%. Based on market values at the end of both years, their gains ranged from 36.7% to 46.2%. Considering the fact that a substantial **portion** of assets has been and still is invested in securities, which benefit very little from a fast-rising market, I believe these results are **reasonably** good. I will continue to forecast that our results will be above average in a declining or level market, but it will be all we can do to keep pace with a rising market.

#### 1958 年的成果

在去年的信件中，我曾提及：

“我们的业绩在熊市中往往比在牛市表现更好。因此，我们表现出色是应该的。在股市大幅上涨的年份，如果能够获得与市场平均回报水平持平的业绩，我就非常满意了。”

后面一句话恰好描述了 1958 年的市场状况，我的预测得以证实。道琼斯工业平均指数从 435 点攀升至 583 点，再加上大约20点的股息，道琼斯指数收益达到了 38.5%。五家合伙企业所取得的平均成果略高于这一数字。根据年初和年末的市场价格，他们的收益率介于 36.7% 至 46.2% 之间。鉴于我们有相当一部分资金是在快速上涨的股市中投资的，收益比较低，所以我认为今年总体的成果是相当不错的。我的观点仍然不变，在下跌或平稳股市中，我们的业绩将高于平均水平；而在股市上升时，我们的目标是至少能够跟上股市的增长步伐。

#### TYPICAL SITUATION

So that you may better understand our method of operation, I think it would be well to review a specific activity of 1958. Last year I referred to our largest holding which comprised 10% to 20% of the assets of the various partnerships. I pointed out that it was to our interest to have this stock decline or remain relatively steady, so that we could acquire an even larger position and that for this reason such a security would probably hold back our comparative performance in a bull market.

This stock was the Commonwealth Trust Co. of Union City, New Jersey. At the time we started to purchase the stock, it had an intrinsic value $125 per share computed on a conservative basis. However, for good reasons, it

   4paid no cash dividend at all despite earnings of about $10 per share which was largely responsible for a depressed price of about $50 per share. So here we had a very well managed bank with substantial earnings power selling at a large discount from intrinsic value. Management was friendly to us as new stockholders and risk of any ultimate loss seemed minimal.

Commonwealth was 25.5% owned by a larger bank (Commonwealth had assets of about $50 Million – about half the size of the First National in Omaha), which had desired a merger for many years. Such a merger was prevented for persona1 reasons, but there was evidence that this situation would not continue indefinitely. Thus we had a combination of:

1. Very strong defensive characteristics;

2. Good solid value building up at a satisfactory pace and;

3. Evidence to the effect that eventually this value would be unlocked although it might be one year or ten

years. If the latter were true, the value would presumably have been built up to a considerably larger figure, say, $250 per share.

Over a period of a year or so, we were successful in obtaining about 12% of the bank at a price averaging about $51 per share. Obviously it was definitely to our advantage to have the stock remain dormant in price. Our block of stock increased in value as its size grew, particularly after we became the second largest stockholder with sufficient voting power to warrant consultation on any merger proposal.

Commonwealth only had about 300 stockholders and probably averaged two trades or so per month, so you can understand why I say that the activity of the stock market generally had very little effect on the price movement of some of our holdings.

Unfortunately we did run into some competition on buying, which railed the price to about $65 where we were neither buyer nor seller. Very small buying orders can create price changes of this magnitude in an inactive stock, which explains the importance of not having any “Leakage” regarding our portfolio holdings.

Late in the year we were successful in finding a special situation where we could become the largest holder at an attractive price, so we sold our block of Commonwealth obtaining $80 per share although the quoted market was about 20% lower at the time.

It is obvious that we could still be sitting with $50 stock patiently buying in dribs and drabs, and I would be quite happy with such a program although our performance relative to the market last year would have looked poor. The year when a situation such at Commonwealth results in a realized profit is, to a great extent, fortuitous. Thus, our performance for any single year has serious limitations as a basis for estimating long term results. However, I believe that a program of investing in such undervalued well protected securities offers the surest means of long term profits in securities.

I might mention that the buyer of the stock at $80 can expect to do quite well over the years. However, the relative undervaluation at $80 with an intrinsic value $135 is quite different from a price $50 with an intrinsic value of $125, and it seemed to me that our capital could better be employed in the situation which replaced it. This new situation is somewhat larger than Commonwealth and represents about 25% of the assets of the various partnerships. While the degree of undervaluation is no greater than in many other securities we own (or even than some) we are the largest stockholder and this has substantial advantages many times in determining the length of time required to correct the undervaluation. In this particular holding we are virtually assured of a performance better than that of the Dow-Jones for the period we hold it.

#### THE CURRENT SITUATION

The higher the level of the market, the fewer the undervalued securities and I am finding some difficulty in securing an adequate number of attractive investments. I would prefer to increase the percentage of our assets in work-outs, but these are very difficult to find on the right terms.

To the extent possible, therefore, I am attempting to create my own work-outs by acquiring large positions in several undervalued securities. Such a policy should lead to the fulfillment of my earlier forecast – an above average performance in a bear market. It is on this basis that I hope to be judged. If you have any questions, feel free to ask them.

WARREN E. BUFFETT 2-11-59