How to Pick Stocks Like Warren Buffett: Profiting from the Bargain Hunting Strategies of the World’s Greatest Value Investor

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A $10,000 investment in Warren Buffett’s original 1956 portfolio would today be worth a staggering $250 million … after taxes! What are his investing secrets? How to Pick Stocks Like Warren Buffett contains the answers and shows, step-by-profitable-step, how any investor can follow Buffett’s path to consistently find bargains in all markets: up, down, or sideways. How to Pick Stocks Like Warren Buffett sticks to the basics: how Buffett continually finds bargain… More >>

How to Pick Stocks Like Warren Buffett: Profiting from the Bargain Hunting Strategies of the World’s Greatest Value Investor

Buffett?s Value Investing Style

Warren Buffett is the world famous stock market guru. Recently, he bought stakes of General Electric Co (GE) and Goldman Sachs Group. General Electric Co (GE) is a technology and services giant company which is listed in Dow Jones board; whereas, Goldman Sachs Group (GS) is a financial heavyweight company, which is listed in New York Security Exchange (NYSE). Through his famous investment company; Bershire Hathaway, Buffett invested US$8bil in these two companies. His action startled many people in stock market. When everybody was taking their money out from the Wall Street, he invested such a huge amount of money. There is no surprise actually because he at one time said that the best time to enter the market was when everybody was not interested in stocks. He also stated that it was difficult to buy a popular stocks and made profit from it. Besides, he also said that when everybody was in fear was the best time to enter the market but not when everybody was greedy. According to financial specialists, Buffett investment is a long term investment.

Currently, stock prices are considered as irrational due to the heavy sell down. So, now it is the best time to invest. When investing in a company, we should invest to the company management and market strategy. In this type of investment, good stocks should be held as long as possible by the investors.

When investing in stock market, Warren Buffett is very careful. He sets very strict requirements to select stocks. So, stocks that fulfill his requirements are seldom being found. Earnings versus growth, high return on equity, minimal debts, strength of management and simple business model are five main criteria, which are used by Buffett to select stocks to invest. He usually concentrates in a few solid stocks, which able to give high return of investment. These few stocks usually are in the industries that he understands the most. He is also very careful to the local bourse, which is an emerging market that could be very volatile. Besides, he is also watchful to the market sentiment, which could be easily affected by many other external factors.

Good stocks are worth to hold for as long as possible. This is because good stocks such as blue chip stocks are able to ride through bad times and recover over time. Buffett is the most successful and trusted investors. His investments in GE and Goldman Sachs will restore the confidence of some of the investor on the Wall Street. When Buffett invests in stocks, underlying fundamentals of a company are the must will be investigated by him rather than market sentiment. Because of his astute investment skill, he is dubbed as “The Oracle of Omaha”. Intrinsic value of a business is always will be determined by him and he is willing to pay a good price for it as long as the business has the intrinsic value. Buffett is very prudent and holds a principle that if he can not understand the operation of the business; he will not invest in it. That’s why, he escaped the dotcom market crash. He will check the fundamentals of the companies that he intends to invest by analyzing the companies’ annual reports. This is his simple investment principle.

He is the chairman of Berkshire Hathaway and this company’s stock is the most expensive on Wall Street. In a letter last year to his shareholders, he stated that Bershire was looking to invest to the companies, which had competitive advantage in a stable industry for long-term prospects. His philosophy is that the stock price will increase as long as the business does well. Investment in PetroChina, which is an oil and gas firm in China, was one of his most successful investments. He bought the stake for this company for an initial sum of US$500 mil and then sold it for US$3.5 bil. Investments in companies such as Coca-Cola, American Express and Gillette are also among his successful investments.

Alexander Chong –

Author of “Workable Option Trading Strategies”.

The Business of Value Investing: Six Essential Elements to Buying Companies Like Warren Buffett

  • ISBN13: 9780470444481
  • Condition: NEW
  • Notes: Brand New from Publisher. No Remainder Mark.

Product Description
A blueprint to successful value investing Successful value investors have an ingrained mental framework through which all investments decisions are made. This framework, which stems from the father of value investing, Benjamin Graham-who believed that investment is most intelligent when it is most businesslike-can put you in a better position to improve the overall performance of your portfolio. Written by Sham Gad-founder of the Gad Partners Funds, a value-… More >>

The Business of Value Investing: Six Essential Elements to Buying Companies Like Warren Buffett

Measure the Value of What You Are Doing as Carefully as Warren Buffett

Master investor Warren Buffett, CEO of Berkshire Hathaway, has a simple test for making an investment: Would he buy and hold the whole business at that price for the next several decades? Using careful measurements of what a private investor would pay for such a business, he makes a judgment of whether there’s enough of a bargain compared to the business’s value to warrant an investment.

That approach has allowed Mr. Buffett to become one of the wealthiest people on Earth.

What can measurements do for you in creating breakthrough business solutions?

A breakthrough solution is any way of accomplishing 20 times more with the same time, effort, and resources.

How do you develop such great improvements?

Follow these steps:

1. Understand the importance of measuring performance.

2. Decide what to measure.

3. Identify the future best practice and measure it.

4. Implement beyond the future best practice.

5. Identify the ideal best practice.

6. Pursue the ideal best practice.

7. Select the right people and provide the right motivation.

8. Continually repeat the first seven steps.

In this essay, I’ll focus on the first step.

Measurements Help Erase Complacency

Most people view the measuring process too narrowly. Here’s an example: A corporate planner went to a seminar given by corporate strategist Peter Drucker.

The planner asked Drucker to pick the best single measure of corporate performance. Drucker replied, “My dear sir, you obviously know nothing. There is no single measure of corporate performance that is any good. Use them all and try to develop new ones, and each will teach you something you need to know.”

Drucker’s point was that measurements are highly subjective and imperfect. Would-be stallbusters are going to need lots more measures.

I’d Rather Not Know That!

One CEO tells another Peter Drucker story about measurements. Drucker had presented a seminar on personal improvement to the CEO’s U.S. Air Force group years earlier. Each man was instructed to measure in great detail how he spent his time for a week.

The CEO found this task to be a life-changing experience. The measurements revealed all of his bad habits and put the CEO on guard to avoid those bad habits. Unfortunately, this CEO’s example is rarely followed.

Try this exercise for yourself. Measure how much time you spend each week on the telephone, doing each routine task, commuting, watching reruns on television, and so forth. Then look at how much you accomplished. You will see that measurements can help redirect your efforts into more productive activities.

A Perpetual Measuring Machine

Visitors to the finance and data processing staffs of a large company were astonished to note that each cubicle’s walls were literally covered with performance measurements. The idea was to encourage more focus on expanding productivity.

Almost all of the measurements had been developed by the workers for their own use. By looking at each others’ measurements, staff members could see how well they were doing in comparison. People pitched in to help lower performers improve so that everyone could earn department-wide, performance-based bonuses.

How did they do? Personal productivity gains of 25 percent were not unusual. Furthermore, corporate productivity in these same areas grew by a similar degree. By comparison, most organizations shoot for 2 to 3 percent annual productivity increases. Those low targets telegraph to everyone that they can take it easy.

End Results Versus Causes

Management of a luxury hotel chain learned that guests were dissatisfied because it took too long for room service breakfast orders to arrive. The chain jumped in to solve the problem. It added more room service waiters. It even added more kitchen staff.

But the situation got worse, not better. Finally, they looked at how long it took for a waiter to make a delivery and return to the kitchen.

Wait! Here was something. The round trips took much too long. Management asked the room service waiters why. The bottleneck was quickly spotted. The waiters were delayed by as much as eight minutes by slow elevator arrivals at the kitchen and the guest room floors.

What was going on? Housekeepers were delivering a day’s worth of clean sheets and towels at the same time. Since housekeepers had to unload large amounts of linen on each floor, they usually stopped the elevators while the unloading occurred.

Understanding the cause, linen deliveries were rescheduled to another time. Room-service complaints dropped to near zero.

With enough of the right measurements to find the causes of your performance, you’ll soon be working on the right things, too.

Almost Perfect Is Often Not Good Enough

After many American manufacturers found that their quality badly lagged non-American competitors in the 1980s, quality improvement became an obsession. Soon, many companies were bragging that they performed at Six Sigma levels (hardly any errors per million activities).

Closer examination suggested that some of these companies had missed the boat. They had only achieved being nearly perfect in delivering outmoded offerings. Motorola, for instance, the renowned Six Sigma innovator, saw its profits evaporate in the 1990s when the company fell behind Nokia and others in delivering new digital technologies to the market.

Some companies also didn’t know how to measure their performance. They broke down every process into hundreds of aspects. Each aspect was measured for performance.

Sure enough, almost all aspects were done perfectly more than 99.9 percent of the time. Everyone was smiling . . . except the customers. As measured by what customers cared about, deliveries were deficient almost half the time.

What was going on? It turns out that those little errors across hundreds of aspects compound and can cumulatively hit the customer hard. The firm should have been primarily measuring its ultimate performance for customers and then looking selectively into detail to locate where large strides could be made.

A key business lesson is that excellence is a moving target. When you satisfy the customer in one area, you need to move your attention to other wellsprings of dissatisfaction. Many organizations forget to move on to the next area of concern.

In the unending mantra heard in many organizations to serve customers better, it’s easy to forget that there are other stakeholders. Be sure to check how you are doing for them, too. If employees hate working for you, customer service won’t be very good either.

Be cautious in your measurements. Small experiments may work simply because of the Hawthorne Effect: Performance may improve simply because you’ve made a change, rather than because of what the change is.

Stop making changes, and performance will often drop off again. Now, management pros understand that you have to check your tests to be sure that improvements will be lasting.

Feedback Nourishes Learning

It’s not enough to measure. You also have to learn from what the measurements tell you. Then, when you can access information that competitors lack, you can sneak ahead.

Here’s an example: Dell Corporation leads in personal computers and gains its orders through direct sales over the telephone and the Internet. Its competitors sell through wholesalers, value-added resellers, and stores.

Dell is learning moment by moment what features its customers most want. Competitors have to use indirect, after-the-fact measurements to estimate what Dell already knows.

Dell can be out testing a new insight from daily measurements long before the competitors even know about the new customer need. With each iteration of this feedback, Dell’s knowledge moves further ahead of competitors.

As a result of learning based on powerful measurements, Dell was able to steam ahead of all its well-known global competitors despite Dell’s humble beginnings in Michael Dell’s college dormitory room.


Use Measurements to Improve Your Personal Effectiveness

Ask yourself the following questions to better allocate your time and efforts:

-How could I avoid having to do the least productive tasks at all and get better results?

-How else could I have gotten these tasks done to get better results in less time?

-How could I delegate these tasks to others for better results?

-How could I inexpensively automate these tasks and meet my purposes?

-When was I effective?

-Why was I effective then?

-When was I ineffective?

-Why was I ineffective then?

-How much time am I spending on time wasters?

-How could I better spend the time I use on time wasters?

-What will be the benefits to me and others of spending my time in these more productive areas?

Use Measurements to Improve the Effectiveness of Others

After you have acted on the answers to your personal improvement questions, you will be prepared to be credible as a helpful coach to others, especially with the answers to the following questions:

-How can you interest other people in measurements?

-How can you help others set up and use helpful measurements?

-How can the message about the value of properly using measurements be spread even further?

Start making your efforts count!

Donald Mitchell is coauthor of six books including The 2,000 Percent Squared Solution, The 2,000 Percent Solution, and The 2,000 Percent Solution Workbook. Read about creating breakthroughs through 2,000 percent solutions and receive tips by e-mail by registering for free at .

Buffett Beyond Value: Why Warren Buffett Looks to Growth and Management When Investing

  • ISBN13: 9780470467152
  • Condition: NEW
  • Notes: Brand New from Publisher. No Remainder Mark.

Product Description
A detailed look at how Warren Buffett really invests In this engaging new book, author Prem Jain extracts Warren Buffett’s wisdom from his writings, Berkshire Hathaway financial statements, and his letters to shareholders and partners in his partnership firms-thousands of pages written over the last fifty years. Jain uncovers the key elements of Buffett’s approach that every investor should be aware of. With Buffett Beyond Value, you’ll learn that, contrary… More >>

Buffett Beyond Value: Why Warren Buffett Looks to Growth and Management When Investing