Warren Buffett is worth over $113B because of investing.
Over 90% of that wealth came after he turned 65.
Here’s a breakdown of his investment strategy:
Over 90% of that wealth came after he turned 65.
Here’s a breakdown of his investment strategy:
There are tons of investment strategies and styles:
- Value
- Growth
- Dividends
- Index funds
- Day trading
But Warren Buffett focuses on value.
He invests in companies whose stock prices are lower than what the company is actually worth.
Here’s how he does it in 6 steps:
- Value
- Growth
- Dividends
- Index funds
- Day trading
But Warren Buffett focuses on value.
He invests in companies whose stock prices are lower than what the company is actually worth.
Here’s how he does it in 6 steps:
1. Return on Investment
Buffett focuses on the 10+ year return on investment and compares it to other companies in the same industry.
This shows him how a company’s returns hold up against competitors.
Here’s how he calculates return on investment:
Net profit ÷ Initial cost
Buffett focuses on the 10+ year return on investment and compares it to other companies in the same industry.
This shows him how a company’s returns hold up against competitors.
Here’s how he calculates return on investment:
Net profit ÷ Initial cost
2. Debt
Buffett prefers companies that can fund their operations and growth with their own resources.
A company with a lot of debt fuels earnings growth with borrowed money.
A company with little debt fuels earnings growth with shareholder equity.
Buffett prefers the latter.
Buffett prefers companies that can fund their operations and growth with their own resources.
A company with a lot of debt fuels earnings growth with borrowed money.
A company with little debt fuels earnings growth with shareholder equity.
Buffett prefers the latter.
3. Profits
Buffett looks at profit margins from 5+ years ago.
He asks 2 questions:
- How much does the company make after expenses?
- Is the company consistently making more money?
He wants to see high-profit margins that increase year over year compared to competitors.
Buffett looks at profit margins from 5+ years ago.
He asks 2 questions:
- How much does the company make after expenses?
- Is the company consistently making more money?
He wants to see high-profit margins that increase year over year compared to competitors.
4. Age
Buffett prefers companies that have been publicly traded for at least 10 years.
This provides him with the historical data needed to do adequate research.
And helps him avoid volatile IPOs and short-term fads.
Buffett prefers companies that have been publicly traded for at least 10 years.
This provides him with the historical data needed to do adequate research.
And helps him avoid volatile IPOs and short-term fads.
5. Moat
A.k.a competitive advantage.
Buffett doesn’t invest in companies whose products/services are too similar to their competitors.
If nothing sets them apart from its competition, how can it outperform them?
It can't and Buffett understands this.
A.k.a competitive advantage.
Buffett doesn’t invest in companies whose products/services are too similar to their competitors.
If nothing sets them apart from its competition, how can it outperform them?
It can't and Buffett understands this.
6. Value
Buffett looks at a company’s:
- Assets
- Earnings
- Management
- Future growth
And more to determine a company’s intrinsic value.
He asks what the market cap of the business is, and what the fundamentals say it should be.
Then invests accordingly.
Buffett looks at a company’s:
- Assets
- Earnings
- Management
- Future growth
And more to determine a company’s intrinsic value.
He asks what the market cap of the business is, and what the fundamentals say it should be.
Then invests accordingly.
TL;DR:
1. Return on Investment
2. Debt
3. Profits
4. Age
5. Moat
6. Value
1. Return on Investment
2. Debt
3. Profits
4. Age
5. Moat
6. Value
Thank you for reading!
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