Warren Buffett Investment Rules and Books
Warren Buffett: The Sage of Omaha
Warren Buffett is on of the most successful investors of all time and is the primary shareholder in Berkshire Hathaway. He has ranked as the richest person in the world as recently as 2008 and is still probably the second or third richest man in the world despite significant donations to charity.
Warren Buffet: Investment Strategies
Warren Buffet's Investment Rules, Articles and Advice
Buffett has written many articles and books on the subject of investing and his style is Value Investing where shares are bought only if they meet certain criteria that indicate that they are cheap compared to other shares, the market and to the actual value of their assets and business. e.g. companies that are popular and growing fast may be overpriced because everyone knows the story of their success so people over-pay and would therefore be ignored in favour boring stocks that no one wants and are therefore under-priced.
It sounds simple and the basics are, but I would highly recommend reading one of the many books on the subjects of value investing for more detailed insight.
Here are the Basics:
1: Be frugal
Buffett lives in the same modest house in Omaha, Nebraska, that he bought 50 odd years ago and drives his own car.
A frugal investor demands the same quality from managers
Avoid corporate waste, excessive executive pay or perks.
Frugal people don't need fast returns to support extravagant lifestyles
2: Wait for the 'fat pitch'
Resist constantly buying or selling stocks.
"Lethargy bordering on sloth remains the cornerstone of our investment style," (Buffett in his 1990 annual report to Berkshire Hathaway shareholders. Wait a long time until market turbulence brings the "fat pitch", or stocks of great companies trading at really cheap valuations.
3: Be a contrarian
Go against the crowd. "We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful," (Buffett in a 1986 letter to shareholders)
Be skeptical of the conventional wisdom, not because the crowd is always wrong but because the crowd's wisdom is probably already reflected in market prices (Todd Lowenstein, a portfolio co-manager of the HighMark Value Momentum Fund).
4: Stick with what you know
If you don't understand a company's product or how it makes money, avoid it.
"Stay within your circle of confidence."
During the late 1990s boom, Buffett avoided tech companies, confessing that he could not understand what they did. He looked wrong until the bubble burst.
5: Don't depend on others to say you're right
6: Buy companies cheap
Calculating an "intrinsic value" for a business, by examining what similar companies sell for or calculating the present value of all the future cash flow and build in a "margin of safety" by purchasing a stock well below its intrinsic value.
7: Look for companies with economic moats
A sustainable competitive advantage: A company should have a barrier to entry (a moat) that keeps competitors at bay.
8: Buy big, concentrated positions
Rather than diversifying, when Buffett finds a company he likes, he piles into it in a big way.
9: Hold for life
Buffett's favorite holding period is "forever."
10: Believe in America