Warren Buffett’s 13 Point Investment Checklist for Buying Stocks
By Lee Jackson
Source: 247 Wall St
http://247wallst.com/investing/2017/07/ ... Newsletter
1. Is the business simple and understandable?
2. Does the business have a consistent operating history?
3. Does the business have favorable long-term prospects?
4. Is management rational with its capital?
5. Is management candid with the shareholders?
6. Does management resist the “institutional imperative”? In other words, do they avoid groupthink.
7. Is the focus return on equity?
8. What is the rate on “owner earnings”? Owner earnings is an extrapolated estimate of an owner’s earnings (free cash flow) over a defined period (typically a year).
9. Is there a high profit margin?
10. Has the company created $1 of market value for every $1 retained?
11. Financial analysis: Focus on return on equity, not earnings per share. Free cash flow. High profit margins, and most importantly, how good will the company be in 10 years versus the competition from peers.
12. What is the value of the business?
13. Can the company be purchased at a significant discount to its value?
The value of a stock idea can come from a combination of four sources:
1. How much money you put in the idea.
2. How cheap the stock is.
3. How fast the stock is compounding its value.
4. How long you own the stock.
Ask yourself:
1. Does it seem likely I might feel comfortable putting more of my portfolio into this idea than any other idea I am looking at right now?
2. Does it seem likely I might end up holding this idea for longer than any other idea I am looking at right now?
3. Does it seem likely this stock will compound its intrinsic value faster than any other idea I am looking at right now?
4. Does it seem likely this stock is cheaper than any other idea I am looking at right now?
It is possible, however, to get a lot out of a single idea through any combination of these four factors:
1. High growth.
2. Low price.
3. Big position size.
4. Long holding period.
1) Buffett teaches us not to try to time the markets.
2) Buffett says to not be afraid to buy the dips.
3) Buffett is all about getting things down to the KISS (keep it simple stupid).
4) Buffett says to start young.
5) Buffett implores to "not lose money"!
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