Investment lessons from Warren Buffet

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  • Make a few smart decisions than 100 average decisions.
  • The exact patterns do not repeat. still, investors keep trying!
  • You need only 2-3 businesses to be successful
  • Spend more time reading annual reports and business and industry articles that will improve your knowledge as an owner
  • Buy low P/E stocks
  • A dividend-paying company should have zero debt
  • If the salary of the CEO is much higher than his immediate, it's a warning flag!
  • Keep a pile of cash on hand for unknown opportunities
  • Stocks with high price-to-earnings (P/E) ratios can be overpriced
  • know about the company through its customers, competitors, former employees, and managers
  • Buffet follows Phil Fisher and Ben Graham
  • Do not go behind investment fads of the market
  • It is better to invest 80% in few companies only and the rest 20% in others
  • Buffet makes investment decisions solely on how the business operates
  • Business tenets Buffet follows
    1. Simple and understandable business
    2. A business must have a consistent operation history
    3. A business must have favourable long term prospects
  • The intrinsic value of a stock is its true value. It refers to what a stock (or any asset, for that matter) is actually worth -- even if some investors think it's worth a lot more or less than that amount.
  • Buying back shares by a company is good
  • Have a margin of safety on the intrinsic value before buying a business. Buy business less than the intrinsic value at discount.
  • Buy companies at low prices
  • sometimes you have to trust the founders and CEO's
  • If a company is buying back stocks it's time to buy
  • Phil Phisher has less than 10 companies and 75% investment in 3-4 companies
  • Quarterly performance does not indicate how the business is performing.
  • Charlie Munger: look through Earnings, ROE, or MOS
  • Most Investors gets trapped in fear and greed
  • Buffet tries to be ready when others are fearful and fearful when others are greedy
  • ask yourself "has anybody done anything foolish lately that will allow me an opportunity to buy good business at a great price?"
  • Do not be worried about or speculate about the economy or the interest rate going up or down
  • Buy a business that generates cash in excess of its needs

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