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Wednesday, February 10, 2016

Investment Strategy: Warren's Way

Recently I've been reading the book "Intelligent Investor" by Benjamin Graham and I came across chapter 15: Stock Selection for the Enterprising Investor. In that chapter, there was a part that talks about Warren's way of investing and I find it to be something worth sharing with you guys.


Warren Buffett, perhaps the most successful investor, who happened to be Benjamin Graham's most acknowledged and popular student. Buffett and his partner, Charles Munger combined Graham's "margin of safety" and detachment from the market with their own innovative emphasis on future growth. 

Warren's Way

He looks for what he calls "franchise" companies with strong consumer brands, easily understandable business, robust financial health, and near monopolies in their market like H & R Block, Gillette, and the Washington Post Co. Buffett loves to invest in stock when a scandal, big loss or other bad news passes over it like a storm cloud. An example is he bought Coca-Cola soon after its disastrous rollout of "New Coke" and the market crash of 1987. Another criteria is on the management of the company. Warren Buffett looks at managers who set and meet realistic goals, build businesses from within rather than through acquisition, allocate capital wisely and do not pay themselves hundred-million dollar jackpots of stock options. Buffett insists on steady and sustainable growth in earnings so that the company will worth more in the future than it is today.

In his annual reports, archived at BerkshireHathaway website, Buffett highlights his thinking on his investment. He publicly revealed more about his approach or written such compellingly readable essays. 

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