I’m rereading The Warren Buffett Way by Robert Hagstrom. I enjoyed this book last year, and I decided to read it again after reading Hagstrom’s book Warren Buffett: Inside the Ultimate Money Mind.

The book contains lots of insightful information about Buffett’s investing approach and how he thinks about capital allocations as the CEO of Berkshire Hathaway. One part of the book I found invaluable was the chapter called “Common Stock Purchases.” In this chapter, Hagstrom walks through Buffett’s process to analyze and value nine of his biggest investments: GEICO, Capital Cities/ABC, Coca-Cola, and others.

Many people are familiar with Buffett’s investing strategy, but how he applied it when making investment decisions isn’t always clear. Hagstrom explains how Buffett valued each company and compares his valuations to the prices he paid. He walks through the math and shows how Buffett’s investments were made for prices below the intrinsic values that Buffett calculated. Buying for less than intrinsic value is core to his strategy of investing only when there’s a margin of safety.

I noticed that Buffett sometimes broke his own rules, such as when he invested in GEICO. Buffett usually invests only in companies with a consistent operating history that are generating increased free cash flow. However, when he invested significantly in GEICO in 1976, the company was on the verge of bankruptcy, had zero earnings, and needed a turnaround. Over several years, Buffett bought roughly 33% of the company. Hagstrom does a great job of detailing why he made this seemingly risky investment. Needless to say, Buffett was right, as GEICO is now a household name. This example reinforces that rules sometimes need to be broken when great investing opportunities present themselves. It also shows how Buffett spent decades preparing for this investment by reading and learning about insurance, and how that preparation positioned him to act swiftly when he needed to.