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Warren Buffett Investing

Warren Buffett Investing

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Published by: shadysbr0ken on Mar 07, 2011
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Ajit Jain Lou Simpson National Indemnity Gen Re GEICO BH Reinsurance Group Jack Ringwalt Carl Reichardt Bill

Ruane Rick Cuniff Sequoia Fund Ruane, Cuniff & Company Daniel Grossman John Neff Walter Schloss Buffett defined cash flow as reported earnings plus depreciation, depletion, amo rtization, and certain other noncash charges, less the average annual capex requ ired for a company to maintain its unit volume and competitive position. Business Tenets 1. Is the business simple and understandable? 2. Does the business have a consistent operating history? 3. Does the business have favorable long-term prospects? Management Tenets 4. Is management rational? 5. Is management candid with its shareholders? 6. Does management resist the institutional imperative? Financial tenets 7. What is the return on equity? 8. What are the company's "owner earnings"? 9. What are the profit margins? 10. Has the company created at least one dollar of market value for every dollar retained? Value Tenets 11. What is the value of the company? 12. Can it be purchased at a significant discount to its value? GAAP results need to show: 1. Approximately how much is the company worth? 2. What is the likelihood that it can meet its future obligations? 3. How good a job are its managers doing, given the hands they have been dealt? In evaluating people, look for integrity, intelligence, and energy. Franchise: one where a product is needed or desired, has no close substitute, an d is unregulated. Risk Arbitrage: 1. How likely is it that the promised event will actually occur? 2. How long will your money be tied up? 3. What chance is there that something better will transpire? 4. What will happen if the event does not take place because of antitrust actino , financing glitches, etc? Focus Investing 1. Concentrate your investments in outstanding companies run by strong managemen

t. 2. Limit yourself to the number of enty is good - more than twenty is 3. Pick the very best of your good t there. 4. Think long-term: 5 to 10 years, 5. Volatility happens. Carry on.

companies you can truly understand. Ten to tw asking for trouble. companies, and put the bulk of your investmen minimum.

"If the new thing you are considering purchasing is not better than what you alr eady know is available, then it hasn't met your threshold. This screens out 99% of what you see." Munger's two-track analysis: 1. What are the factors that really govern the interests involved, rationally co nsidered? 2. What are the subconscious influences where the brain at a subconscious level is automatically doing these things? (useful, but often misfunction) "The great man is he who in the midst of the crowd keeps with perfect sweetness the independence of solitude." - Emerson

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