Book review: How Buffett Does It
Posted April 20, 2008on:
Book title: How Buffet Does It.
I just finished reading this book which I bought in KLIBF last week.
I would like to suggest that all beginners in investing area to read this book. I read this book to gain as much knowledge as I can ( maybe to be the Buffet’s Protege), hoping that I would select the right investment product for my future.
He shared 24 simple investing strategies that we can also apply. There are:
1) Choose simplicity over complexity. This is the essence of Buffet’s philosophy. He invest in easy to understand, solid , enduring businesses for success.
Buffett “If you don’t understand a business, don’t buy it”
2) Make your own investment decision. Become a value investor. It’s proven to be a very rewarding technique over the long term. To make you own decision, you will need to learn about the basic accounting in the stock market. Start reading investment book or financial periodicals.
3) Maintain proper temperament. People tend to act emotinally when the price goes down. But how does the Buffet approach? Drop in share price mean a buying opportunity for him. You need the kind of temperament that can help you ride out the storms and stick to your long term plans. If you can stay cool while those around you are pancking, you can prevail.
Buffett “Let other people overreact to the market. Keep your head when others do not, and you will benefit”
4) Be patient. Think 10 years, rather than 10 minutes. If you aren’t prepared to hold a given stock for a decade, don’t buy it in the first place.
When did he learn about the need for patience in investing? When he was 11 years old. He made his first stock purchase: 3 shares of Cities Service Preferred at $38 a share. Shortly thereafter, he sold his 3 shares when the price hit $40, earning him a net profit of $5. A few years later, this same stock was selling for $200! Can you imagine?
Buffett “Don’t dwell on the price of stocks. Instead, study the underlying business, its earnings capacity, its future and so on”
I’m attracted with this Q & A with Buffett:
“How long will you wait”. Buffett replied ” If we are in the right place, we will wait indefinitely”
5) Buy businesses, not stocks. Business performance is the key to picking stocks. Study the long term track record of any company that is on your buy list.
Buffett ” Don’t think about stock in the short-term. Think about business in the long term”
6) Look for a company that is a Franchise. He always invest in company that produces products that are needed and desired, that has no close substitutes, that does not eat up capital and not subject to price regulation. Example, he invested in See’s Candies. This company has been selling candy successfully for more than 70 years and most likely will be selling candy for the next 70 years.
Will be continued later friends. Alternatively, you can buy this book from the nearest BookStore 😉
Have a nice day