Tip #1: No stocks in mind
Someone asked how do you compare the latest buying opportunity with other buying opportunities in history?
Warren Buffett says that in rare cases it is obvious whether the stock market is too undervalued or too overvalued, but 90% of the time the stock market blurs between the two. You can't invest well if you follow fear when others fear.
The vast majority of people are concerned about stock market movements, about what others are buying and selling, and all they can think about is how stocks have moved in the past and how they will move in the future, whereas warren Buffett is only concerned about how the fundamentals of the company are valued, and he advises investors that it is not the stock you are buying but the company, and as long as the company's earnings continue to grow, the share price will rise significantly sooner or later.
Some ask whether the fact that there are more value investors will lead to fewer investment opportunities.
Warren Buffett says there will always be opportunities to beat the market because people keep making the same mistakes over and over again. You may have to have cash in hand for a long time, but the opportunities will come sooner or later and you have to be ready to take them.
Tip #2: Safety first
In February 2009, Warren Buffett contributed $300 million to buy Preferred Stock in Harley motorcycle with a 15% dividend yield. The Harley preferred stock is more like a bond than a stock, but in a little over a year Harley’s share price has doubled. So Warren Buffett was asked why he didn't buy Harley’s common stock in the first place.
Buffett explained: I wasn't sure how much Harley’s stock was worth, but one thing i was very sure of was that Harley was unlikely to fail and that a 15% fixed yield was very attractive. I knew enough to invest in Harley bonds, but I didn't know enough to invest in Harley stock.
The secret to happiness is to lower expectations. When it comes to investing, always remember that safety comes first, not money. Lower your expectations, prepare for the worst and only make investments that are safe and certain, never invest blindly and riskily. My iron rule: Number one, never lose money; number two, never forget number one.
Tip #3: Choose stocks like a wife
Some people ask how to prevent another financial crisis from happening.
Warren Buffett said that financial crises happen again and again because humans will always make crazy moves and changing human habits is impossible. That's why it's vital to get a good education on investing money and develop good habits during your teenage years. A little more knowledge in primary school is better than thousands of books in graduate school.
"The chains of habit are too light to be felt until they are too heavy to break free", so Warren Buffett has launched an investment and finance cartoon specifically for young children, and investing must start with children. Think about it, most people choose stocks very poorly, but choose their wives quite well. Why? Because children learn from the marriages of their mothers and fathers and others, and always choose carefully and rigorously before they end up with the ideal happy partner. But these people have been brought up without any educational training in stock selection and spend far less time and effort on stock selection than on choosing their life partner. Why is Warren Buffett so good at picking stocks? He often says that picking stocks is like picking a wife. In fact, his stock selection is more rigorous and prudent than his wife's.
Tip #4: Know your enemy
Warren Buffett says that you simply cannot be an expert in all types of companies. You don't have to be an expert in everything, but you must know the companies you put your money into very well indeed. It doesn't matter how big your circle of competence is, but it's important to know the boundaries of your circle of competence. You don't need to be incredibly clever, just avoid making major mistakes and you'll do quite well.
Munger adds that if you want to be good at something you have to think a lot and practice a lot. Always go to bed every day a little bit better than when you get up in the morning, so that slowly but surely you will improve a lot in the long run. From the time you are very young you have to start asking yourself what works and what doesn't.
To know everything is to know nothing, and one trick will get you everywhere. Firstly, know your own strengths, secondly, play to your strengths and study a certain type of company to become proficient in order to achieve great success. As sun tzu's art of war says, if you know yourself and your opponent, you will never lose a hundred battles. The circle of competence is not fixed and you have to keep learning to expand your circle of competence.
Tip #5: First-class business
Warren Buffett has stressed in the past that he looks for good companies with strong and sustainable competitive advantages in their business. At this agma, he asked manger if you could only own one company, which one would you choose?
Munger said that what we have both been working so hard on for the last few decades is to find the best company with strong pricing power and a kind of monopoly position.
Buffett believes that investing is about investing in people, and he places great importance on whether a company has top-notch management. In his defiance of gold man Sachs at the gam, Buffett expressed his "100% support" For gold man CEO Blankfein. When asked who could replace Blankfein, Buffett joked that if he had a twin brother, I would get him to replace him, and Buffett has even said before that he is worthy of a daughter.
Someone asked if you would intervene directly if you found unethical or illegal behavior within a company. Buffett said, "Of course I would, we would never disregard our reputation to make money." Buffett takes his reputation very seriously and expects the management of the companies he invests in to be honest and upright at all times. In fact, listening to gossip and doing insider trading is all ill-gotten gains. It may make you big money for a while, but this hidden time bomb will give you a lifetime of internal anxiety, so why bother?
Tip #7: Top performance
some people ask, which Berkshire company has the best Roi? Which company in the world has the best Roi?
Warren Buffett said that companies like Coca-Cola can operate well without investing capital, and some companies even operate well with negative input costs, such as magazines that charge subscribers in advance for subscriptions and only send the magazines out later. The amount of capital required to run a business is critical, and companies that have negative capital inputs are best. Many consumer companies have a good return on investment, but too many people want to buy these companies, so it is difficult to buy them at a good price.
Warren Buffett places a high value on a company's top performance, measured by its return on shareholder equity, and he is particularly fond of superstar companies that can grow consistently without investing too much capital.
Tip #8: Valuation
Someone asked how he got better and better at valuing companies.
Buffett said I started out knowing nothing about valuation, then my mentor graham taught me to value certain specific types of companies, but these have since almost all disappeared, and then manger steered me towards good companies with a sustainable competitive advantage. The goal of investing is to find good companies that have a sustainable competitive advantage over the next 20 years and a margin of safety in terms of price. If i can't value a company based on fundamental analysis, i simply won't focus on it, which is essential to being a good investor.
Tip #9: Concentrate your investments
In recent years, warren Buffett has bought a succession of capital-intensive companies, such as in the energy and industrial categories. Last year's acquisition of Burlington railroad was the largest amount in Buffett’s history. This is a big change; Buffett generally only invests in superstar companies with small capital requirements and high investment returns, and rarely invests in such utility companies.
Warren Buffett explained the change to shareholders, mainly because Berkshire? Hathaway has become very large. The ones with less capital needs and high returns are generally smaller companies that don't give a big enough rate of return for the whole company." We put a lot of money into some very good businesses, but in terms of returns, those deals are not as good as companies that can be bought for very little money." As the company's capital grew larger, Buffett had to concentrate on investing in bigger companies, despite the lower returns.
Tip #10: Invest for the long term
Buffett says the key in investing is to buy a stock in a really good company at a reasonable price and then forget about it and keep holding it for a long, long time. In September 2008, Berkshire, through its MidAmerican energy, bought about 10 per cent of BYD for $231 million. It was a week after the collapse of Lehman brothers bank, and since then bid shares have risen nearly sevenfold, making warren Buffett a $1.3 billion profit in just one year. At the shareholder meeting, MidAmerican energy chairman sokol said Berkshire’s investment in bid was a long-term investment. Buffett said, "I support BYD's plan to headquarter its three U.S. Operations in Los Angeles"
Buffett used to invest only in us companies, but with the globalization of the economy he has started investing overseas and he is very much focused on China. A Chinese student asked Buffett what he had learned from China, and Buffett joked that BYD, a company he was bullish on, had a very unusual group of guys. He also said that China is an astounding economy and that it has huge potential for growth, which is now beginning to emerge. He said he would visit China in September this year and travel to India in march next year." In 20 years’, time Chinese and Indians will definitely be living better lives than they are today." He predicted.
