Legendary value investors' secrets
November 20, 2024
Books
What is this value investing book called 52-week Low Formula about? The book cover puts it this way: A contrarian strategy that lowers risk, beats the market, and overcomes human emotion. Author Luke Wiley said in the book: “It is about buying the “right business” at its 52-week low versus buying “any business” at its…
Read More about 52-week-low stock strategyBenjamin Graham's thoughts
Net-net value investing is a term derived from one of Benjamin Graham’s investment strategies. It is a technique valuing a company’s stock based on its net current assets per share (NCAVPS). In his book, The Intelligent Investor, under the chapter “Stock Selection for the Enterprising Investor”, the father of value investing talked about net-current-asset or bargain issues….
Read More about What is net-net?Benjamin Graham's thoughts
In value investing, a term often cited is the Graham Number. The term is named after Benjamim Graham (1894-1976), the father of value investor and the author of The Intelligent Investor, from which the Graham Number came about. In the chapter on Stock Selection for the Defensive Investor, he listed seven quality and quantity criteria…
Read More about Graham Number explainedBerkshire Hathaway
“A very minor gain in per-share intrinsic value took place in 2022 through Berkshire sharerepurchases as well as similar moves at Apple and American Express, both significant investeesof ours. At Berkshire, we directly increased your interest in our unique collection of businesses byrepurchasing 1.2% of the company’s outstanding shares. At Apple and Amex, repurchasesincreased Berkshire’s…
Read More about Value-accretive repurchases of stocks benefit all owners: Warren BuffettBerkshire Hathaway
In his FY2022 letter to Berkshire Hathaway’s shareholders dated February 25, 2023, legendary value investor Warren Buffett shares the secret sauce of his company. “In August 1994 – yes, 1994 – Berkshire completed its seven-year purchase of the 400million shares of Coca-Cola we now own. The total cost was $1.3 billion – then a very…
Read More about Berkshire Hathaway’s secret sauceCharlie Munger
Berkshire Hathaway vice-chairman Charlie Munger died on November 28, 2023, just 33 days before his 100th birthday. Charlie Munger, a lawyer by training, had been Warren Buffett’s right-hand man at Berkshire Hathaway. Bloomberg called Mr Charlie Munger “the alter ego, sidekick and foil to billionaire investor Warren Buffett for almost 60 years”. Together, “they transformed…
Read More about Charlie Munger – the architect of Berkshire HathawayBenjamin Graham's thoughts
“Fear is the foe of the faddist, but the friend of the fundamentalist.” – Warren Buffett So the global stock markets, led by the US, are plunging. On August 1 and 2, 2024, Wall Street took a big hit. On August 2 (Friday itself), the Dow Jones Industrial Average dived some 610 points, or 1.5…
Read More about Stock markets plunging? Should you panic?Benjamin Graham's thoughts
“Investment is most intelligent when it is most businesslike,” Benjamin Graham said in his book The Intelligent Investor. “If a person sets out to make profits from security purchases and sales, he is embarking on a business venture of his own, which must be run in accordance with accepted business principles if it is to…
Read More about Investment: Four Benjamin Graham business principlesBenjamin Graham's thoughts
7 Secrets to Investing Like Warren Buffett was coauthored by Mary Buffett and Sean Seah. Mary Buffett is the former daughter-in-law of legendary investor Warren Buffett, the chairman of Berkshire Hathaway. Mary Buffet has coauthored many books with David Clark, the first being Buffettology. Sean Seah was born, educated and lives in Singapore. A strong…
Read More about 7 Secrets to investing like Warren BuffettBooks
If you have been reading legendary investor Warren Buffett’s value investment philosophy and wonder how to put two and two together, one recommended book for reading is “Warren Buffett and the Interpretation of Financial Statements” by Mary Buffett and David Clark. Written in simple and easy to understand language, the book guides you through the…
Read More about Warren Buffett and the Interpretation of Financial StatementsBenjamin Graham's thoughts
In his book, The Intelligent Investor, Benjamin Graham suggested seven quality and quantitative criteria for the selection of common stocks for a defensive investor’s portfolio. The seven suggested criteria are: Let’s zoom in on criteria (6) and (7) above. Moderate ratio of price to assets: Current price of stock should be no more than 1.5…
Read More about Stock selection for defensive investors: seven criteriaWarren Buffett recommended reading
In his 2003 chairman’s letter dated February 27, 2004, to Berkshire Hathaway shareholders, legendary investor recommendated four books for reading. Here is what Warren Buffett said: “A 2003 book that investors can learn much from is Bull! by Maggie Mahar. Two other books I’drecommend are The Smartest Guys in the Room by Bethany McLean and…
Read More about Four books recommended by Warren BuffettWarren Buffett lessons
In his annual letter dated February 28, 2004, to Berkshire Hathaway shareholders, chairman Warren Buffett shared how several institutional shareholders and their advisors decided that he lacked “independence” in his role as a director of Coca-Cola. “…independence is defined in Webster’s as ‘not subject to control by others’,” Mr Buffett said, adding: “I’m puzzled how…
Read More about What has Matthew 6:21 to do with director independence?Warren Buffett lessons
In his annual letter dated Feb 21, 2003, to Berkshire Hathaway shareholders, chairman Warren Buffett had three suggestions for investors. Mr Buffett’s first suggestion was for investors to beware of companies displaying weak accounting. “If a company still does not expense options, or if its pension assumptions are fanciful, watch out. When managements take the…
Read More about Warren Buffett: There is seldom one cockroach in the kitchenBenjamin Graham's thoughts
“An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.” – Benjamin Graham (The Intelligent Investor) Giving his thoughts on Investment versus Speculation in his opening chapter in The Intelligent Investor, Benjamin Graham, the father of value investing, said: “Outright speculation…
Read More about Investment vs SpeculationBerkshire Hathaway
Berkshire Hathaway has abandoned its long-time practice of featuring the percentage change in its per-share book value. In his annual letter dated February 23, 2019, to Berkshire Hathaway shareholders, chairman Warren Buffett said: “Long-time readers of our annual reports will have spotted the different way in which I opened this letter. For nearly three decades,…
Read More about Berkshire Hathaway abandons “book value per share” practiceWarren Buffett's thoughts
In Warren Buffett’s annual letter to shareholders dated February 24, 2018, for FY2017, one line stands out in the section on acquisitions: “Despite our recent drought of acquisitions, Charlie (Munger) and I believe that from time to time Berkshire will have opportunities to make very large purchases. In the meantime, we will stick with our…
Read More about Warren Buffett on prudence in acquisitionsWarren Buffett lessons
In Berkshire Hathaway’s annual report for FY2017, chairman Warren Buffett gave examples of “four truly major dips” suffered by Berkshire shares in the past. “Berkshire, itself, provides some vivid examples of how price randomness in the short term can obscure long-term growth in value,” Mr Buffett said. The legendary investor said the examples offered “the…
Read More about “Avoid borrowing money to buy stocks”Investment criteria
Warren Buffett’s long-held “moat” strategy has come to the fore in the wake of an argument between the legendary investor and Telsa’s Elon Musk. A CNBC report (Warren Buffett responds to Elon Musk’s criticism: ‘I don’t think he’d want to take us on in candy’) quoted Telsa’s Musk as saying this week that “moats are lame”…
Read More about Understanding Warren Buffett’s moat strategyBerkshire Hathaway
Berkshire Hathaway chairman Warren Buffett minces no words when it comes to cryptocurrency, calling bitcoin “probably rat poisoned squared” and his right-hand man, Charlie Munger, has even harsher words, saying “it (cryptocurrency) is like someone else is trading turds and you decide I can’t be left out”. A Yahoo Finance May 6, 2018, report (Why…
Read More about Buffett, Munger have harsh words for cryptocurrencyBerkshire Hathaway
Warren Buffett’s Berkshire Hathaway bought an additional 75 million shares of Apple in the first quarter of 2018, while dumping its remaining stake in IBM, said a Bloomberg May 4, 2018 report (Buffett Buys a Further 75 Million Apple Shares, Sells Out of IBM). The report quoted the Berkshire Hathaway chairman as having said in…
Read More about Berkshire Hathaway takes a bigger bite of Apple, dumps IBMBenjamin Graham's thoughts
Legendary value investor Warren Buffett is still dismissive of bitcoin as an investment. He laid out his latest thinking on the cryptocurrency in a recent interview with Yahoo Finance (Warren Buffett on buying bitcoin: ‘That is not investing’, April 28, 2018). “If you buy something like a farm, an apartment house, or an interest in…
Read More about Why Warren Buffett steers clear of bitcoinQuotes
“You only learn who has been swimming naked when the tide goes out…” – Warren Buffett (letter to Berkshire Hathaway shareholders in FY2007) P/S Full quote: “As house prices fall, a huge amount of financial folly is being exposed. You only learn who has been swimming naked when the tide goes out – and what…
Read More about Who has been swimming naked?Investment philosophy
Berkshire Hathaway chairman Warren Buffett shared in a Yahoo Finance interview (“Warren Buffett explains how you could’ve turned $114 into $400,000 with a simple long-term investment” dated April 25, 2018) how a sum of $114 invested in the S&P 500 in 1942, with dividends reinvested, could have turned into $400,000 today. “Let me give you…
Read More about Mind-blowing compoundingBerkshire Hathaway
Discussions about share repurchases often become heated in the investment world. But, in the words of Berkshire Hathaway chairman Warren Buffett, assessing the desirability of repurchases isn’t that complicated. “From the standpoint of exiting shareholders, repurchases are always a plus. Though the day-to-day impact of these purchases is usually minuscule, it’s always better for a…
Read More about Share repurchases: What is smart at one price is stupid at anotherBerkshire Hathaway
“Intrinsic value is an all-important concept that offers the only logical approach to evaluating the relative attractiveness of investments and businesses,” Warren Buffett said in the 2016 Annual Report of Berkshire Hathaway. “Intrinsic value can be defined simply: It is the discounted value of the cash that can be taken out of a business during…
Read More about Warren Buffett on intrinsic valueAswath Damodaran on valuation
“A postulate of sound investing is that an investor does not pay more for an asset than it is worth,” says Aswath Damodaran, the well-known author of “Damodaran on Valuation”, a book on security analysis for investment and corporate finance. “The statement may seem logical and obvious, but it is forgotten and rediscovered at some…
Read More about Philosophical basis for valuationBenjamin Graham's thoughts
Benjamin Graham (1894-1976), the father of value investing, said in his widely-followed book, The Intelligent Investor, that one choice for the defensive investor in stock selection would be to apply a set of standards to each purchase, to make sure that he obtains (i) a minimum of quality in the past performance and current financial…
Read More about Stock selection for the defensive investorBenjamin Graham's thoughts
“To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information. What is needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework.” These words came from legendary investor Warren Buffett, the best known disciple of Benjamin Graham, the…
Read More about The Intelligent InvestorInvestment philosophy
Is investing in the stock market something that is complex, mysterious and risky and therefore best left to the professional? “Warren Buffett has shown this to be a myth,” says James Pardoe in his book “How Buffett Does It”. James Pardoe says in the book, which shares 24 simple investment strategies from the world’s greatest…
Read More about Choose simplicity over complexityBenjamin Graham's thoughts
“An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.” Source: Benjamin Graham, “The Intelligent Investor”
Read More about What is speculation?Quotes
“A climate of fear is your friend when investing; a euphoric world is your enemy.” – Warren Buffett (2013 letter to Berkshire Hathaway shareholders)
Read More about A climate of fear is your friendBenjamin Graham's thoughts
“You don’t try and buy businesses worth $83 million for $80 million. You leave yourself an enormous margin (of safety). When you build a bridge, you insist it can carry 30,000 pounds, but you only drive 10,000-pound trucks across it. And that same principle works in investing. ” – Warren Buffett on what Benjamin Graham,…
Read More about Margin of safetyInvestment philosophy
Investment philosophy
“In my opinion, investment success will not be produced by arcane formulae, computer programs or signals flashed by the price behavior of stocks and markets. Rather an investor will succeed by coupling good business judgment with an ability to insulate his thoughts and behavior from the super-contagious emotions that swirl about the marketplace.” – Warren…
Read More about Warren Buffett on investment successPhilip Fisher thoughts
In Philip Fisher’s “Five More Don’ts For Investors”, one of those don’ts is titled “Don’t be afraid of buying on a war scare”. American stock investor Philip Arthur Fisher (September 8, 1907 – March 11, 2004) was best known as the author of the investment guide book known as Common Stocks and Uncommon Profits. The…
Read More about Don’t be afraid of buying on a war scare: Philip FisherWarren Buffett lessons
Global markets are in a turmoil as the USA and China poise themselves for a possible trade war. This brings to mind what legendary investor Warren Buffett said in his FY2016 letter to Berkshire Hathaway shareholders. “The years ahead will occasionally deliver major market declines – even panics – that will affect virtually all stocks,”…
Read More about Two things to remember amid panic over possible US-China trade warWarren Buffett lessons
Back in December 2007, Warren Buffett made a ten-year US$1 million prize bet (background reading: Warren Buffett is set to win this US$500,000 wager) with asset manager Protégé Partners. Essentially, Warren Buffett wanted to prove a point: that his pick – a virtually cost-free investment in an unmanaged S&P 500 index fund – would, over…
Read More about Warren Buffett wins bet and charity gets US$2.2m instead of US$1mBenjamin Graham's thoughts
“In the short run, the market is a voting machine; in the long run, however, it becomes a weighing machine.” – Benjamin Graham Legendary value investor Warren Buffett, the chairman of Berkshire Hathaway, once again cited the abovementioned maxim of Benjamin Graham in his FY2017 letter to shareholders. What is so endearing about this quote…
Read More about Warren Buffett: Don’t treat marketable common stocks as ticker symbolsBerkshire Hathaway owner-related business principles
Source: Berkshire Hathaway Annual Report 2016 1. Although our form is corporate, our attitude is partnership. Charlie Munger and I think of our shareholders as ownerpartners, and of ourselves as managing partners. (Because of the size of our shareholdings we are also, for better or worse, controlling partners.) We do not view the company itself…
Read More about Berkshire Hathaway’s 15 owner-related business principlesWarren Buffett's thoughts
In his February 27, 2016, letter to Berkshire Hathaway for FY2015, chairman Warren Buffett said: “While I’m on the subject of our owners’ gaining knowledge, let me remind you that Charlie and I believe all shareholders should simultaneously have access to new information that Berkshire releases and, if possible, should also have adequate time to…
Read More about How Berkshire Hathaway treats company’s new informationBerkshire Hathaway
Does Warren Buffett or Berkshire Hathaway hold certain stocks forever? To answer this question, one needs to go back to Berkshire Hathaway’s 2016 Annual Report 2016, in which chairman Warren Buffett said: “Sometimes the comments of shareholders or media imply that we will own certain stocks “forever.” It is true that we own some stocks…
Read More about Does Warren Buffett or Berkshire Hathaway hold certain stocks forever?Benjamin Graham's thoughts
“An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.” – Benjamin Graham, “The Intelligent Investor” Benjamin Graham, widely known as the father of value investing, said that “outright speculation is neither illegal, immoral, nor (for most people) fattening to the pocketbook”….
Read More about Investment versus SpeculationBerkshire Hathaway
A new release by Berkshire Hathaway dated 10 July 2017 said that chairman Warren Buffett that day converted 12,500 of his Class A shares into 18,750,000 Class B shares. “Of these Class B shares, 18,628,189 have been donated to five foundations: Bill & Melinda Gates Foundation, Susan Thompson Buffett Foundation, Sherwood Foundation, Howard G. Buffett Foundation and…
Read More about Berkshire Hathaway ‘A’ and ‘B’ sharesBenjamin Graham's thoughts
“The years ahead will occasionally deliver major market declines – even panics – that will affect virtually all stocks,” Warren Buffett said in his FY2016 letter to Berkshire Hathaway shareholders. “No one can tell you when these traumas will occur – not me, not Charlie, not economists, not the media. Meg McConnell of the New…
Read More about Warren Buffett: Two things to remember during scary periodsBerkshire Hathaway
Warren Buffett, who owned about 81 million shares in IBM at the end of 2016, sold off about a third of that stake in the first and second quarters of 2017. He told CNBC this in a report dated May 4, 2017 (Warren Buffett has sold IBM shares, and ‘revalued’ tech icon downward, cites ‘big strong…
Read More about Why Warren Buffett sold about one-third of stake in IBMBooks
“What are the matters about which the investor should learn if he is to obtain the type of investment which in a few years might show a gain of several hundred per cent, or over a longer period of time might show a correspondingly greater increase? ” In other words, what attributes should a company have to give…
Read More about What stocks to buy: 15 points to look forWho's Who
The name Ray DeVoe was mentioned by Warren Buffett in his FY2010 letter to Berkshire Hathaway shareholders. Warren Buffett said: “We keep our cash largely in U.S. Treasury bills and avoid other short-term securities yielding a few more basis points, a policy we adhered to long before the frailties of commercial paper and money market funds…
Read More about Who is Ray DeVoe?Investment philosophy
“Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius,” Warren Buffett said in a comment in Berkshire Hathaway’s FY2016 annual report. “But Sir Isaac’s talents didn’t extend to investing: He lost a bundle in the South Sea Bubble, explaining later, “I can calculate the movement of the stars,…
Read More about The Fourth Law of Motion that Sir Isaac Newton failed to discoverInvestment philosophy
Background on Warren Buffett’s US$500,000 wager: Warren Buffett said in Berkshire’s 2005 annual report that active investment management by professionals – in aggregate – would over a period of years underperform the returns achieved by rank amateurs who simply sat still. Recalling his argument, he said in his FY2016 letter to Berkshire Hathaway shareholders: “I explained…
Read More about Warren Buffett is set to win this US$500,000 wagerWarren Buffett's thoughts
“It should come as no surprise that iconic investor Warren Buffett is one of the world’s best-known fans of Cherry Coca-Cola. At almost every public appearance for a generation, Buffett has been seen taking a swig of his favorite drink,” says a March 31, 2017 article (Chinese Consumers Do a Double-Take as Warren Buffett Graces…
Read More about Warren Buffett graces Cherry Coke cansCommon Stocks And Uncommon Profits
1. Don’t overstress diversification Investors have been so oversold on diversification that fear of having too many eggs in one basket has caused them to put far too little into companies they thoroughly know and far too much in others about which they know nothing at all. “It never seems to occur to them, and…
Read More about Philip Fisher’s five more don’ts for investorsCommon Stocks And Uncommon Profits
Common Stocks and Uncommon Profits by Philip Fisher lists five don’ts for investors 1. Don’t buy into promotional companies All too often, young promotional companies are dominated by one or two individuals who have great talent for certain phases of business procedure but are lacking in other equally essential talents. They may be superb salesmen…
Read More about Five don’ts for investors: Philip FisherCommon Stocks And Uncommon Profits
For a man like Berkshire Hathaway chairman Warren Buffett who doesn’t personally own an iPhone, one wonders why he more than doubled Berkshire Hathaway’s holdings in Apple to about 2.5 per cent in January 2017. At that point, Mr Buffett owned US$17 billion worth of the tech giant’s stock In a CNBC report on 27…
Read More about Philip Fisher’s scuttlebutt methodBenjamin Graham's thoughts
In Chapter 5 (The Defensive Investor and Common Stocks) of The Intelligent Investor, Benjamin Graham, the father of value investing, touched on various aspects of defensive investment, among which was dollar-cost averaging, an application of a “formula investment”. Elaborating, he said: “The New York Stock Exchange has put considerable effort into popularizing its ‘monthly purchase…
Read More about Benjamin Graham on dollar-cost averagingWarren Buffett lessons
Berkshire Hathaway’s four long-standing criteria in selecting a new board director: owner-oriented, business-savvy, interested and truly independent. Chairman Warren Buffett said: “I say “truly” because many directors who are now deemed independent by various authorities and observers are far from that, relying heavily as they do on directors’ fees to maintain their standard of living….
Read More about How Berkshire Hathaway selects a new directorInvestment criteria
“Woody Allen once explained that the advantage of being bi-sexual is that it doubles your chance of finding a date on Saturday night,” Warren Buffett said in his FY2015 letter to Berkshire Hathaway. Why did the Berkshire Hathaway chairman say this? “In like manner – well, not exactly like manner – our appetite for either…
Read More about When it comes to stocks, Berkshire Hathaway looks for wonderful companiesBooks
It takes many great stock picks to make up for just a few big errors, says Pat Dorsey, author of The Five Rules for Successful Stock Investing. So even before one goes into any analysis process, care should be taken to avoid seven easily avoidable mistakes. Here is Pat Dorsey’s list of seven mistakes to…
Read More about Seven stock investing mistakes to avoid: Pat DorseyMarketable securities
Warren Buffett’s FY2016’s letter dated February 25, 2017, to Berkshire Hathaway shareholders showed the group had 61,242,652 Apple Inc shares, a stake of 1.1 per cent costing US$6.747 billion and worth a market value of US$7.093 billion. This has since doubled. According to a CNBC report on Feb 27, 2017, the stake had doubled in…
Read More about Warren Buffett loves AppleWarren Buffett lessons
“Excellent business results by corporations will translate over the long term into correspondingly excellent market value and dividend results for owners, minority as well as majority,” Warren Buffett once said. How true this is even today although Mr Buffett said this as far back as 1978 in a letter to Berkshire Hathaway shareholders for FY1977….
Read More about How Warren Buffett picks stocksWarren Buffett lessons
When companies say they achieve record earnings, be wary how they define “record” earnings. Warren Buffett said in a March 14, 1978, shareholder letter: “Most companies define ‘record’ earnings as a new high in earnings per share. Since businesses customarily add from year to year to their equity base, we find nothing particularly noteworthy in…
Read More about Misleading ‘record’ earningsBenjamin Graham's thoughts
In investment, having a margin of safety itself is not sufficient. Why is this so? Benjamin Graham, the founder of value investing, uses the simple basis of the insurance-underwriting business to explain the need for diversification. He said that diversification is the companion of margin of safety. In other words, margin of safety and diversification…
Read More about Benjamin Graham Theory Of DiversificationBenjamin Graham's thoughts
Benjamin Graham (May 8, 1894 – September 21, 1976), the father of value investing, summed up the secret of sound investment in three words: margin of safety. This was in his book, The Intelligent Investor. Warren Buffett, Benjamin Graham’s most famous disciple, explained his mentor’s margin of safety concept this way (Source: The Superinvestors of…
Read More about Margin of Safety: Secret of Sound InvestmentBenjamin Graham's thoughts
The Intelligent Investor Chapter 14 – Stock Selection for the Defensive Investor 1. Adequate Size of the Enterprise The idea is to exclude small companies which may be subject to more than average vicissitudes especially in the industrial field. Not less than US$100 million of annual sales for an industrial company and, not less than…
Read More about Benjamin Graham on stock selection for the defensive investorBenjamin Graham's thoughts
In Chapter 1 of The Intelligent Investor, author Benjamin Graham (May 8, 1894 – September 21, 1976), the father of value investing, made a clear distinction between the term “investor” and “speculator“. Benjamin Graham, as far back as 1934, said in Security Analysis (a book he co-authored): “An investment operation is one which, upon thorough…
Read More about Investment versus speculationBooks
“For it is, so to speak, a game of Snap, of Old Maid, of Musical Chairs — a pastime in which he is victor who says Snap neither too soon nor too late, who passed the Old Maid to his neighbour before the game is over, who secures a chair for himself when the music…
Read More about A game of Snap, of Old Maid, of Musical Chairs – John Maynard KeynesVideos
The Wall Street Crash of 1929, also known as Black Tuesday, the Great Crash, or the Stock Market Crash of 1929, began on October 24, 1929, and was the most devastating stock market crash in the history of the United States, when taking into consideration the full extent and duration of its fallout. The crash signaled…
Read More about Wall Street Crash of 1929 and the Great Depression