Last week’s question and answer

I came to life in 1963 as a women’s apparel store in Columbus, Ohio. Today, I sport more than 4,000 stores and seven retail brands. My brands include Victoria’s Secret, Bath & Body Works, The Limited, The White Barn Candle Co., Henri Bendel and Express. In the past, I’ve owned, reorganized or spun off brands such as Abercrombie & Fitch, Structure, Lerner, Lane Bryant and Intimate Brands. I went public in 1969, and my annual sales top $9 billion. I employ more than 100,000 people and boast more than 200,000 stockholders. Who am I? (Answer: Limited Brands)

Insights from Omaha

Last month, nearly 20,000 Berkshire Hathaway shareholders listened to Chairman Warren Buffett and his partner, Charlie Munger, answer questions for five hours in Omaha. Here are some snippets, paraphrased:

• On investing. You need an intellectual framework, which you can get mostly from Benjamin Graham’s book, “The Intelligent Investor” (HarperBusiness, $20). Then, think about businesses you can get your mind around if you really work at it. You have to have the right temperament. If you can’t control yourself, you’re going to have disasters. … The whole world in the late 1990s went a little mad in terms of investments. … What we learn from history is that people don’t learn from history.
• On stock valuation. If you pay way too much for a business, you’ll get a poor return on what you paid, even if the company is a solid performer.
• On inflation. Treasury Inflation-Protected Securities are not a bad investment for people worried about inflation heating up, which we’re seeing signs of. Learn more at www.investinginbonds.com.
• On index funds. If you invest in a very-low-cost index fund — where you don’t put the money in at one time but average in over 10 years — you’ll do better than 90 percent of people who start investing at the same time. Learn more at www.fool.com.
• On the mutual fund scandal. A significant fraction of mutual fund managers took bribes to betray their own shareholders. It was as if a man came up and said, “Why don’t we kill your mother and we’ll split the insurance money?” And many people said, “Why, yes, I’d like some of that insurance money.”
• On initial public offerings. The average person is going to get creamed buying IPOs.
• On achieving happiness and success. Look at the people you like. What qualities do you like about them? Why don’t you copy them? And look at the people you don’t like. What don’t you like about them, and can you stop doing what they do?

For more, read Buffett’s educational letters to shareholders at www.berkshirehathaway .com and Roger Lowenstein’s “Buffett: The Making of an American Capitalist” (Main Street Books, $19).

Borders’ growth

Borders Group (NYSE: BGP) recently reported first-quarter earnings, as did rival Barnes & Noble (NYSE: BKS), with both booksellers earning modest profits after a string of first-quarter troubles. Revenues at Borders jumped 11 percent to $831 million, driving net income to a $3 million gain, after a $4.8 million loss the year before.

As was the case at Barnes & Noble, sales of political and war-related books were brisk, along with rising sales of music and DVDs. Borders’ strongest performance, however, was generated in international operations. Sales rose 29 percent (12 percent excluding favorable currency fluctuations) to $103 million, and net losses narrowed by nearly 25 percent to $3.2 million.

Aside from the year-over-year comparisons, which were aided by last year’s war-challenged first quarter, Borders also saw a number of other positive developments. Gross profit margins improved, administrative and sales expenses fell, a $50 million stock buyback was completed, and the company’s first dividend was paid in January.

Given the maturity of the domestic bookstore industry, Borders’ success in the international market represents a distinct competitive advantage over its peers. The company forecasts a 20 percent increase in international sales for the year, helping to fuel an expected 15 percent jump in consolidated net income. If Borders can continue to expand in this arena, trim expenses and keep a close eye on underperforming stores, the next few earnings releases should be real page turners.

The wrong company

For my MBA investment class project, I picked Graco Industries to study, thinking it made products for babies. Imagine my surprise when I found out it made paint-spraying equipment. We were each given $100,000 in mythical money to spend. At the end of the class, I was the only student who had made money on my project. Having researched the company for the class, I was so impressed with its financials that I bought the stock for real. I invested $2,000 and now have $6,000. The stock has never flinched in its climb upward. Research pays. — M.L. Newmin, Lancaster, Pa.

The Fool Responds: It is indeed important to research a company before buying into it. Many people have lost money by blindly buying on the advice of others, and many have even bought the wrong stock because they got the name or ticker symbol wrong. Some, for example, have confused Sysco, the food-service distribution giant, with Cisco, the networking and communications equipment maker. Sysco has outperformed Cisco during the past three years.