Financial Success:

Venture Investing

Warren Buffett

The World's Most Successful Investor: Success Story and Key Teachings

Warren Buffett advice quotes

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Identifying an Outstanding Company

Buffett's 4+4 Investment Criteria

4 Non-financial Investment Criteria

  1. It is simple and understandable.

  2. It has "sustainable competitive advantage" Download PowerPoint presentation, pdf e-book   >>>

  3. It has a consistent operating history.

  4. It has favorable long-term prospects Download PowerPoint presentation, pdf e-book

4 Financial Investment Criteria

  1. Return of equity

  2. "Owner earning" (the share of profits that belongs to investors)

  3. Profit margins

  4. Return on reinvested profits

8 Best Practices of Successful Companies

Balanced Business System

 

Buffett's 7 Contrarian Principles

Ignoring Convention

  1. Do not follow the crowd. Ignore the market, the crowd, and its fashions.

  2. Have fixed investment principles.

  3. Do not put your eggs in many baskets. Put all your eggs in one basket and proceed to watch that basket... More

Buffett's Five Tips for Individual Investors

  1.  "Look at stocks as parts of business. Ask yourself, 'How would I feel if the Stock Exchange was closing tomorrow for the next three years?' If I am happy owning the stock under that circumstance, I am happy with the business. That frame of mind is important to investing."... More

 

Warren Buffett Quotes

Someone's sitting in the shade today because someone planted a tree a long time ago.

Honesty is a very expensive gift, Don't expect it from cheap people.

It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.

It's better to hang out with people better than you. Pick out associates whose behavior is better than yours and you'll drift in that direction.

Chains of habit are too light to be felt until they are too heavy to be broken.

Risk comes from not knowing what you're doing.

In the business world, the rearview mirror is always clearer than the windshield.

Only when the tide goes out do you discover who's been swimming naked.

Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.

You only have to do a very few things right in your life so long as you don't do too many things wrong.

The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.

Investment Insights

I don't look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.

Price is what you pay. Value is what you get.

It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.

Time is the friend of the wonderful company, the enemy of the mediocre.

Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years.

Beware of geeks bearing formulas.

Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.

Wide diversification is only required when investors do not understand what they are doing.

The World's Most Successful Investor

"Price is what you pay. Value is what you get." ~ Warren Buffet

Warren Buffett is the world's most successful investor and a self-made billionaire. He is consistently ranked among the world's Top 3 wealthiest people. Buffett generated an average annual return of about 31%.

  3Ws of Venture Investing

Warren Buffett's Key To Investing

Warren Buffett was once asked what is the most important thing he looks for when evaluating a company to invest in.

Without hesitation, he replied, "sustainable competitive advantage" Download PowerPoint presentation, pdf e-book... More

The Power of Focus

Warren Buffett says his companies ability to generate large profits is the result of being able to focus on what is important, and not paying attention to things that would distract the company.

 

Buffett's Teachings on Investment

Warren Buffett is the world's most successful investor. "Buffett's teachings on investment sound deceptively simple. But there is no deception. They truly are simple. Do not allow investment advisers to persuade you that investment is a complex matter needing great expertise. Instead, learn how to assess the fundamental and financial values of a business yourself, and invest according to your convictions."  >>>

Ignoring Conventional Investment Guidelines

Warren Buffett believes that the conventional approach to investment makes it difficult to beat the market and easy to do worse. If you wish to invest well you must be prepared to go against the prevailing wisdom and ignore conventional investment guidelines. You can increase your chances of finding winning stocks by adhering to Buffett's contrarian principles.

Using the Probability Theory

Buffett is a master at the art of fast decision making and arbitrage. The probability theory is essential to Buffett's theory of investment: "Take the probability of loss times the amount of possible loss from the probability of gain times the amount of possible gain. That it what we're trying to do. It's imperfect, but that's what it is all about."

Buffett uses essentially the same approach to investment strategy and arbitrage. In both cases "he buys into situations where the probability is that shares are undervalued and that this undervaluation will be corrected. The difference is time-scale; the arbitrage position will be closed out as soon as possible, while the investment will be kept "indefinitely so long as we expect the business to increase in intrinsic value as a satisfactory rate." That answers the question about how long Buffett believes a share should be held: possibly forever."2

Relying On Gut Instinct

Bill Gates, Founder of Microsoft Corporation and a Berkshire director, praises Buffett's hard-to-imitate management style. "It's baffling to think who else could do it," he says.

Warren Buffet spends most of his day alone in an office with no computer. His desk isn't littered with stock research. "I don't use analysts or fortune tellers, " Buffett says. "If I had to pick one, I don't know which it would be." He deliberately keeps the outside world at bay, believing it is the best way for him to remain "rational" as an investor. If he is interested in investing in a company, he studies the financials himself. "All I have to do is think and not be influenced by others," he says. Warren Buffett "spends the better part of most workdays thinking and reading. He fields a handful of phone calls, and on most days, he confers with the chiefs of of a few Berkshire subsidiaries. He seldom holds meetings."1

Making Fast Decisions  >>>

Warren Buffett "makes swift investment decisions, steers clear of meetings and advisers, eschews set procedures and doesn't require frequent reports from managers. Occasionally he picks up the phone, calls his broker and trades $100 million or more of stock."1

When Buffett is buying stock, he pays little attention to some factors that shape other investors' decisions, such as economic climate. He doesn't wait to see what government is doing to make a trade. Buffet also can move more quickly than his competitors. He has no investment committee, and that allows him to make immediate decisions...  >>>  Case in Point

Smart & Fast Decision Maker 

Hands-Off Management

Buffett believes that managers of the companies he is investing in ought to be left to run their businesses without interference from him and without having to hew any to any unifying corporate strategies or goals. "We delegate to the point of abdication," Buffett says in Berkshire's Owner's Manual.

Despite its investment size, Berkshire Hathways has a tiny staff. It's headquarters is staffed by just 17 employees. The company has no public-relations, human-relations, investor-relations, legal departments, or investment committee. It holds no quarterly earning calls for investors and analysts, has no asset allocation guidelines, and gives no guidance on future earnings. Warren Buffet tells the chiefs of his business units not to produce any special reports for him.

On occasion, when severe problems arise, Buffett abandons his hands-off management approach however.

 

 

References:

"Buffett Still Scores More With Less", Susan Pulliam and Karen Richardson, The Wall Street Journal

"Roads To Success," Robert Heller