Tag: warren buffett

In 1983, Buffett wrote down 13 owner-related business principles explaining Berkshire’s Approach – what are they

In 1983, Warren Buffett wrote down 13 owner-related business principles outlining Berkshire Hathaway’s approach to investing and business management. These principles, which remain relevant today, provide a framework for making sound decisions that prioritize long-term shareholder value.

  1. Own a diversified group of businesses that generate cash and consistently earn above-average returns on capital.

This principle emphasizes the importance of diversification to reduce risk and the pursuit of businesses that can generate consistent and sustainable profits.

  1. Avoid management that is obsessed with meeting short-term earnings targets.

Buffett advocates for a long-term focus, prioritizing decisions that enhance the intrinsic value of the company over short-term financial gains.

  1. Avoid companies with bloated balance sheets and excessive debt.

Financial prudence is essential, and excessive debt can hinder a company’s flexibility and ability to withstand economic downturns.

  1. Seek managers who are passionate about their businesses and put shareholders’ interests first.

Effective management is crucial, and aligning the interests of management with those of shareholders ensures long-term value creation.

  1. Don’t make acquisitions to simply increase size or diversify into unrelated businesses.

Acquisitions should be driven by strategic opportunities that enhance the overall value of Berkshire Hathaway.

  1. Don’t overpay for businesses, even if they appear to be attractive.

Disciplined valuation is paramount, and acquiring businesses at inflated prices can erode shareholder value.

  1. Be patient and willing to wait for the right opportunities to arise.

Investing requires patience and discipline, and rushing into decisions can lead to suboptimal outcomes.

  1. Communicate openly and honestly with shareholders.

Transparency and clear communication foster trust and confidence among shareholders.

  1. Behave as partners, not masters, to your shareholders.

Berkshire Hathaway views shareholders as partners in its success, aligning its actions with their interests.

  1. Don’t let your emotions dictate your investment decisions.

Sound investment decisions are based on rational analysis, not emotional impulses.

  1. Remember that the stock market is a tool, not a gambling machine.

The stock market should be used as a means to acquire ownership in valuable businesses, not as a venue for speculative trading.

  1. Understand that stock prices can be irrational in the short term.

Market fluctuations can be unpredictable, and investors should focus on the long-term intrinsic value of businesses.

  1. Always strive to make decisions that will protect and enhance Berkshire Hathaway’s intrinsic value.

Every decision should be evaluated based on its impact on the company’s long-term value and its ability to deliver superior returns to shareholders.

These 13 owner-related business principles provide valuable insights into Warren Buffett’s investment philosophy and Berkshire Hathaway’s approach to business. By adhering to these principles, investors can make informed decisions that prioritize long-term value creation and sustainable financial success.

Value Investing for New Investors – The Warren Buffett Approach

Value investing is a timeless investment strategy that has been used by some of the most successful investors in history, including Warren Buffett. Value investors look for stocks that are trading below their intrinsic value, with the belief that these stocks will eventually revert to their fair market value and provide a profit for investors.

This ebook is designed to introduce new investors to the basics of value investing. It will cover the following topics:

  • What is value investing?
  • The history of value investing
  • The principles of value investing
  • How to identify undervalued stocks
  • How to construct a value investing portfolio
  • Common mistakes to avoid when value investing

What is Value Investing?

Value investing is an investment strategy that involves buying stocks that are trading below their intrinsic value. Intrinsic value is the true worth of a stock, based on its underlying fundamentals.

Value investors believe that the stock market is often irrational and that stock prices can fluctuate wildly, even when the underlying fundamentals of a company remain strong. This can create opportunities for value investors to buy stocks at a discount to their intrinsic value.

The History of Value Investing

The history of value investing can be traced back to Benjamin Graham, who is considered the father of value investing. Graham was a professor at Columbia University and a successful investor. He wrote a number of books on value investing, including The Intelligent Investor and Security Analysis.

Graham’s teachings were popularized by his student, Warren Buffett. Buffett is one of the most successful investors in history, and he has used value investing principles to generate billions of dollars in wealth for himself and his shareholders.

The Principles of Value Investing

The principles of value investing are simple, but they can be difficult to apply in practice. The following are some of the key principles of value investing:

  • Buy stocks that are trading below their intrinsic value. This is the core principle of value investing. Value investors believe that stocks that are trading below their intrinsic value will eventually revert to their fair market value and provide a profit for investors.
  • Invest for the long term. Value investing is a long-term investment strategy. It takes time for the market to recognize the true value of a stock. Value investors are willing to be patient and wait for the market to catch up.
  • Have a margin of safety. A margin of safety is the difference between the intrinsic value of a stock and its current market price. Value investors want to buy stocks with a large margin of safety to reduce their downside risk.

How to Identify Undervalued Stocks

There are a number of ways to identify undervalued stocks. One common method is to look at a company’s financial statements and valuation ratios.

Value investors typically look for stocks with strong financial statements and low valuation ratios. For example, value investors may look for stocks with a low price-to-earnings ratio (P/E ratio) or a high dividend yield.

How to Construct a Value Investing Portfolio

Once you have identified a number of undervalued stocks, you need to construct a value investing portfolio. This involves diversifying your investments across a variety of sectors and industries. It also involves managing your risk by investing in a variety of stocks with different valuation ratios.

Common Mistakes to Avoid When Value Investing

There are a number of common mistakes that investors make when value investing. Some of the most common mistakes include:

  • Buying stocks without understanding the underlying business. It is important to understand the business model and competitive landscape of any stock before investing.
  • Investing in stocks that are too risky. Value investors should focus on investing in stocks with a large margin of safety to reduce their downside risk.
  • Selling stocks too early. Value investing is a long-term investment strategy. Investors should be patient and wait for the market to recognize the true value of a stock.

Conclusion

Value investing is a time-tested investment strategy that has been used by some of the most successful investors in history. By following the principles of value investing, new investors can position themselves for long-term success.

Additional Resources

If you are interested in learning more about value investing, here are a few additional resources:

  • The Intelligent Investor by Benjamin Graham
  • Security Analysis by Benjamin Graham and David Dodd
  • The Essays of Warren Buffett by Lawrence Cunningham
  • The Little Book of Common Sense Investing by John C. Bogle
  • The Bogleheads’ Guide to Investing by Taylor Larimore, Mel Lindauer, and Michael LeBoeuf

Apple Share Buybacks Since 2012 – $580 billion

via Commonstock

Since 2012, when Apple’s share count peaked, the company have repurchased more than $580 billion in stock.

That’s ~38% of the outstanding share count in ten years.

Even if the revenues remained flat the share price would increase and you would be far better off purely for holding.

Warren Buffett and Berkshire Hathaway hold a huge number of Apple stock – they must be laughing!

Im Tired of YouTube Investment “Gurus”

There are so many investment “gurus” on YouTube and it simply just feels like this is now a step above a used car salesman!

Here is a very good example – Investment Advice! When he simply just adds his money into a very basic Vanguard ETF based off the S&P500.

This is probably as far as it gets from someone who should actually be giving investment advice!

What you really should be watching is video interviews from Warren Buffett – and then also spending a huge amount of time reading and working out your own way to value companies and their intrinsic value.

Shareholders Need to Behave Like Owners – Warren Buffett

https://www.youtube.com/watch?v=r4HZHrcm6mY

Very interesting question to Warren Buffett – in which he then provides a very interesting (yet simplistic) answer.

Shareholders need to act like owners – and in nearly all cases in America – this is forgotten. People forget that when they buy a stock in a business that they are becoming an owner in that business.

Warren Buffett: Amazon’s Jeff Bezos Has Changed The World

Warren Buffett’s views on Jeff Bezos and how he has changed the world. 

Why this matters: Warren Buffett for a long time has been watching Jeff Bezos and commenting on how amazing the run of Amazon has been. It would have been very interesting if Warren Buffett understood the technology industry at the beginning of the internet as it would have provided a lot of great investment opportunities.

What is the Difference Between Berkshire Hathaway BRK.A and BRK.B Shares?

There is very little difference between Berkshire Hathaway’s BRK.A and BRK.B shares.

BRK.B shares were created because Warren Buffett noticed that the BRK.A shares were growing considerable high is cost per share and that these shares were less obtainable by the average retail investor and could only be purchased by either very wealth individuals, unit trusts or mutual funds.

Thus, Warren decided to create BRK.B shares to provide the average investor with the opportunity to purchase shares in Berkshire Hathaway without the huge cost associated with BRK.A.

There are other very small differences, but the above is the only one that really counts.

Warren Buffett’s Berkshire Hathaway Energy Acquires Dominion Energy’s Natural Gas Transmission and Storage Business for $9.7 billion

It has been confirmed that Berkshire Hathaway Inc’s energy unit will acquire Dominion Energy Inc’s natural gas transmission and storage business for $9.7 billion.

This puts Berkshire Hathaway Energy into a very strong position in the market.

Potentially, this is why Warren Buffett has been holding onto an extra large cash sum? Maybe not.