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Gone Fishing With Buffett

July 5, 2013 2 Comments

Warren Buffet follows his own investment method and has stuck to it through thick and thin to made a lot of money. The key principles of this investment method, as described by Sean Seah in his book Gone Fishing with Buffett are as follows:

1. Investment Rule Number 1: Never Lose Money
Investment Rule Number 2: Never Forget Rule Number 1.

2. Risk comes from ignorance.

3. Buy businesses with good and exceptional economics and buy them at a sensible price. Repeat until wealthy.

4. The stock market is the only place where people who drive BMWs take advice from people who take the train.

5. If you need complicated maths for investing, Buffett would probably be distributing newspapers today. Read more of this post

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Edward Zajac – 94 year old investor

June 25, 2011 1 Comment

This is a story I came across in the Economic Times.It seems to be a reprint from Bloomberg.I have this story pinned to my notice board just to remind me how Dumb Money can become Smart Money.Here is a person who seems to have made good money without trying to become an expert at investing.He has accepted his lack of expertise and found a way to benefit from the expertise of the “smart money”.His method involves just looking at some basic facts before putting his money in a company.The skills required are really basic.The rest of his magic merely seems to be a result of compounding due to his Time in the Market and the wisdom that comes from experience.To follow him we don’t need to understand financial statements or master technical analysis.

Buy & hold strategy not dead yet for 94-year-old investor

NEW YORK: Stick with stocks, says investor Edward Zajac. He should know. The 94-year-old has been trading for 72 years and said he’s made about $2.5 million.

“I am a live, open-hearted investor,” said Zajac. “I’m willing to hold that stock 5, 10 years, if I have to.” Zajac, who lives with his daughter in Henderson, Nevada, bought his first stock, Petroleum & Resources, in 1937 while attending the University of Illinois. He’s invested full-time since 1968, after retiring from installing computer systems to travel the US in a recreational vehicle with his wife. Read more of this post

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Buffett’s 7 Filters

March 30, 2011 1 Comment

Anybody who has read anything about Warren Buffett knows he is superbly wealthy and has made all his money through his investment in stocks,that he is a value investor,that his favourite holding period is forever and that he loves his companies to have ‘big moats’.Following are a list of parameters that Buffett uses to evaluate companies.They are from the book ‘The Guru Investor’ by John P. Reese.Why not use these parameters to check out a company before buying its shares?

STABILITY OF EARNINGS:This can be checked by considering the earnings per share (EPS) for the past 10 years. EPS is derived from the residual profit left after payment of all expenses, taxes, depreciation, interest, preference dividends and belongs entirely to equity shareholders. A company should not have a negative EPS in the past 10 years. If the EPS is lower than that in the previous year, the dip should not be more than 45%.

DEBT TO EARNINGS RATIO: The second variable is the level of long-term debt to earnings ratio. Buffett likes conservatively financed companies. He prefers the long-term debt of a company to have been paid off from its net earnings in less than five years. This implies that the long-term debt to earnings ratio should be less than or equal to five.

RETURN ON EQUITY (ROE): The third variable measures how much money a company earns on its equity. The ratio is generally expressed as a percentage. For a company to figure on Buffett’s radar, its 10-year average ROE should be greater than or equal to 15%. Read more of this post