Investment: How Does Buffet Do It?
May 10th, 2010
Warren Buffet is one of the world’s most successful investors.
Here’s how he does it.
The decision to invest has to be based solely upon business principles -
How much is the investment likely to produce in earnings in the future.
What is the likely resale value of the investment in the future
What is the minimum acceptable return to the investor.
Once these have been established, calculate what you are prepared to pay for the investment. You then compare the price you are prepared to pay against the company’s current shareprice. This is the simple version.
Other factors which can often come into play include.
Knowing everything there is to know about the company and sometimes understanding the business better than its director.
Investing in companies which have very secure income flows and thus virtually guarantee profits.
Staying invested in the company for the long-term to take advantage of compounding growth.
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