The Story. With MannKind share price heading south and the pundits' doomsday forecasting continues, we thought shareholders could appreciate Warren Buffett's 2013 letter to the Berkshire Hathaway shareholders. In the essay, Warren describes the story when he bought a 400-acre farm, located 50 miles north of Omaha, from the FDIC back in 1986 for only $280,000.

Similar to Peter Lynch early in his career, Mr. Buffett also learned about what makes a good business by using the "scuttlebutt" technique. First taught by the Father of Growth Investing Phillip Fisher, who is an inspiration to Mr. Buffett, scuttlebutt is basically learning from main street whether an investment is truly promising, rather than listening to rumor mills that either get you to buy or sell a stock. That being said, Mr. Buffett would call up companies, talk to their clients, vendors, competitors, or anyone familiar with the business. And by asking the right questions from various sources, a common theme for the investment would emerge, allowing him to know whether the investment is truly solid.

Source: Quote Essay

At the time, Mr. Buffett did not know anything about operating a farm; but he quickly learned about the business by talking to his son, Howard Graham Buffett who loves farming. Using the information that he learned, Warren calculated that the farm would return 10% annually. Anticipating that the crops' price would move higher in the future as well as the productivity would improve, Buffett picked up the farm at a price lower compared to when the FDIC purchased the property. Sure enough, Warren's predictions came true.

Read more on this story at Retail Investor 360.