Business Intelligence

by James O’Loughlin (02000)

Warren Buffett has served 40 years as chairman and chief executive of Berkshire Hathaway. During that time, the company’s market value has grown from $600 million to $109 billion — a compoud growth rate of 25% per yar. (If Berkshire were to continue that rate of growth for the next 34 years, it would absorb the entire U.S. economy). Today, Berkshire generates annual revenues of $30 billion and employs 112,000 people.

So what is it Warren Buffett is doing differently (and better) than everyone else? This is more than being a good stock picker and investor. Instead, Warren Buffett acts like a CEO who owns the company. He has developed a framework which allows him to do three specific tasks exceptionally well:

Act like the owner of the entire business:
1. Lead and motivate able people
2. Allocate capital intelligently
3. Stay within your Circle of Competence

The challenge, therefore, in emulating the accomplishments of Warren Buffett and Berkshire Hathaway is not to become better at assembling a stock portfolio but to become a better CEO.

The Real Warren Buffett

(13700)

Sane Investing in an Insane World
James Cramer

Your personal investment strategy cannot exist in isolation. There is no such thing as universal rules or insider secrets that will apply to everyone all the time. Rather, your investment strategy can and should vary in sync with your individual investment goals, which will change and evolve throughout your working life.

There are only two genuine reasons why you should invest:

1. To save for retirement > Apply the 25 rules of investing
2. To have some discretionary funds > Apply the 10 commandments of trading

The rules of trading and the rules of investing are quite distinct and different. Many newcomers fail to undrestand or make this distinction, and end up taking ideas that apply in one context and applying them to situations that actually require an entirely different appraoch. This can be detrimental to your ability to achieve your investment goals, and almost guarantees that you’ll get caught up in the periodic periods of “irrational exuberance” that typify the stock markets.

Jim Cramer’s Real Money

A No-Fail Plan For Achieving Financial Freedom At Any Age

by David Bach (12400)

Even if you’ve neglected planning for your retirement until you’re in your thirties, forties, fifties or sixties, it’s still possible to get your own personal financial house in order and finish rich. Specifically, there are five simple strategies you can use right now to get back on track and stop worrying about your financial future:

1. Lighten Up
2. Spend Less
3. Save More
4. Make More
5. Give More

The key beliefs which underpin the start late, finish rich philosophy are:

1. It’s never too late for you to start working towards having a rich retirement, but you should start working on it today.
2. Even if you’re buried in debt, there are still things you can and should be doing to prepare for the future.
3. You don’t have to make a lot of money to be rich. Instead, you need to be smart about how you handle the money you have.
4. The best way to get rich in real estate is by starting small, not by taking huge risks.
5. You can get rich by progressively eliminating the ways you currently waste money and then using that money better.
6. It is possible to start a business on the side which you can use to get ahead while you continue to earn a paycheck.
7. You don’t have to invest in stocks to get rich.
8. You can spend elss, save more and make more — without seriously impacting on your current lifestyle.
9. You can and should reconnect with your dream of financial freedom and go after it regardless of your age.

Start Late, Finish Rich

Investment Strategies of the World’s Greatest Investor

by Robert G. Hagstrom Jr. (13000)

Warren Buffett is one of the most successful stock market investors of the past 30 years.

His entire approach is to focus on the value of the business and its market price. The Buffett approaches to investment are:

1. Never follow the day-to-day fluctuations of the stock market.
The market only exists to make it easier to buy and sell, not to set values. Keep an eye on the market only for someone who is willing to sell a stock at a not-to-be-missed price.

2. Don’t try and analyze or worry about the general economy.
If you can’t predict what the stock market will do from day to day, how can you reliably predict the fate of the economy?

3. Buy a business, not its stock.
Treat a stock purchase as if you were buying the entire business, using the following tenets:

Business Tenets
1. is the business simple and understandable from your perspective as an investor?
2. Does the business have a consistent operating history?
3. Does the business have favorable long-term prospects?

Management Tenets
1. Is management rational?
2. Is management candid with its shareholders?

Financial Tenets
1. Focus on return on equity, not earnings per share
2. Calculate “Owner Earnings”
3. Search for companies with high profit margins
4. For every dollar of retained earnings, has the company created at least one dollar’s extra market value?

Market Tenets
1. What is the value of the business?
2. Can the business currently be purchased at a significant discount to its value?

4. Manage a portfolio of businesses
Intelligent investing means having the priorities of a business owner (focused on long-term value) rather than a stock trader (focused on short-term gains and losses).

The Warren Buffett Way

You might think that institutions, with their large staffs of highly-experienced investment professionals, would be a force for stability and reason in financial markets. They are not; stocks heavily owned and constantly managed by institutions have often been amongst the most inappropriately valued.

–Warren Buffett