More on the rich man Buffet

A book called “The new Buffetology” was on of the first investment books I ever read. I learnt a lot. Not only techniques, but I was so impressed with learning how much information he kept on companies and how he studied it, that I began to equip myself with files and folders and knowledge to do the same!

I can advise anyone interested in the art and business of investing, to read up on this man, who kindly shares his techniques with the world. Some of the pointers we got from Warren Buffet can be summarized as below:

• Invest in companies that do something that you understand and know. Warren “missed out” on the technology boom, simply because he felt that he did not understand enough of it. He made his fortune elsewhere. Frankly, he also missed out on the technology crash because he didn’t invest in companies he did not fully understand.
• Seek out companies that have a monopoly in a certain market segment: For example, companies that have a license, a patent or something that means it does not have to compete on price. Competing on price means that you have to chop-off you profit to remain competitive.
• Make sure cost ratio’s are low and profit margins are high.
• Seek undervalued shares that the market have missed.
• Remember that you are not just buying shares, but you are in fact buying a portion of a company. Consider each investment as if you are buying the whole business.
• Carefully investigate the company’s management and their future plans
• If you invest in such undervalued shares, you do not have to be too concerned with the current economic cycle
• Invest in companies with a constant history of good performance.
• Understand dividend cover and notice trends within this figure over a 5-year period.
• Calculate whether retained earnings was used well, by comparing how much more profit the company made by retaining it, compared to having invested the same amount elsewhere in a 1 year deposit.
• If you invest this way, diversification is not such an important factor, because your selection would protect you from risks.
• Cash is king. Always look for a company that generates more cash than it needs.

The stock exchange holds great opportunities for those willing to learn about investing. Learn from the people who have been successful – I strongly suggest you start indulging in books written by or about the experts such as Warren Buffet!