Why Buffet does so well how you can too
By Yaser Anwar, CSC of Equity Investment Ideas
One reason Buffett (BRK-A) does so well is 'cause he only buys certain types of stocks. He only buys stock in companies that have certain characteristics. We’ll call them the “won’t keep you up at night characteristics.”
The man only buys stock in companies that:
1. Have businesses that are simple and understandable
2. Have little to no debt
3. Have a strong brand name
4. Are leaders in their industry
5. And throw off a lot of free cash flow
Companies that have these characteristics run very little risk of going out of business, running into any regulatory issues, or having a new competitor come along and steal the market away from them.The biggest point to take away from this is that Buffett goes out of his way to avoid investments that require him to jump over “9 foot hurdles.” He waits for opportunities where he can walk over “1 foot hurdles.”Now what if you had a portfolio full of businesses like this?
Regardless of which way the stocks were going, you would know, in your gut, that you still owned a piece of a great company.It’s at times like this when you can truly appreciate this approach to investing.
So What Would Buffett Do?Well, I’ll tell you what he wouldn’t do.He wouldn’t be nervous. He wouldn’t lose sleep.And he certainly wouldn’t be taking any unnecessary risks.That means stay away from any speculative plays. There’s no need to take extra risk at times like these – regardless of your risk tolerance.Companies that are losing money, but on a “path to profitability,” are a big “NO, NO.”You need to find companies that are leaders in their markets, have strong financial characteristics, and are trading near their lows.Buying companies like that will allow you to sleep at night. It’s like having an airbag in your car when it crashes.
Even if this market goes lower, holding onto stocks like these will put you in a great position when the market turns positive again. The strongest companies are always the first to turn.
Remember: In the short term, the stock market is a voting machine – over the long term, it’s a weighing machine. The stronger companies will ALWAYS outweigh the weaker ones.And just so you know, I’m speaking from experience here.Any advice I ever give you is straight form my own personal experiences in the market, and from professionally managing money for others.
This advice has all been what we like to call it around here, “Battle Tested.” So you can bet your bottom dollar that it works.Stay cool and stick to the game plan for now, my friend, and the market will take care of itself.
http://www.equityinvestmentideas.blogspot.com/
One reason Buffett (BRK-A) does so well is 'cause he only buys certain types of stocks. He only buys stock in companies that have certain characteristics. We’ll call them the “won’t keep you up at night characteristics.”
The man only buys stock in companies that:
1. Have businesses that are simple and understandable
2. Have little to no debt
3. Have a strong brand name
4. Are leaders in their industry
5. And throw off a lot of free cash flow
Companies that have these characteristics run very little risk of going out of business, running into any regulatory issues, or having a new competitor come along and steal the market away from them.The biggest point to take away from this is that Buffett goes out of his way to avoid investments that require him to jump over “9 foot hurdles.” He waits for opportunities where he can walk over “1 foot hurdles.”Now what if you had a portfolio full of businesses like this?
Regardless of which way the stocks were going, you would know, in your gut, that you still owned a piece of a great company.It’s at times like this when you can truly appreciate this approach to investing.
So What Would Buffett Do?Well, I’ll tell you what he wouldn’t do.He wouldn’t be nervous. He wouldn’t lose sleep.And he certainly wouldn’t be taking any unnecessary risks.That means stay away from any speculative plays. There’s no need to take extra risk at times like these – regardless of your risk tolerance.Companies that are losing money, but on a “path to profitability,” are a big “NO, NO.”You need to find companies that are leaders in their markets, have strong financial characteristics, and are trading near their lows.Buying companies like that will allow you to sleep at night. It’s like having an airbag in your car when it crashes.
Even if this market goes lower, holding onto stocks like these will put you in a great position when the market turns positive again. The strongest companies are always the first to turn.
Remember: In the short term, the stock market is a voting machine – over the long term, it’s a weighing machine. The stronger companies will ALWAYS outweigh the weaker ones.And just so you know, I’m speaking from experience here.Any advice I ever give you is straight form my own personal experiences in the market, and from professionally managing money for others.
This advice has all been what we like to call it around here, “Battle Tested.” So you can bet your bottom dollar that it works.Stay cool and stick to the game plan for now, my friend, and the market will take care of itself.
http://www.equityinvestmentideas.blogspot.com/
posted by douglas mcintyre at 1:06 PM
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