Learn to invest with Buffett

Chapter 17

Chapter 3 Buffett's most classic investment skills and methods
Chapter 3第1节5+12+8+2投资法则
When buying stocks, you don't just look at the stock or follow the market, but think of yourself as a business analyst.

--Warren Buffett
巴菲特的5+12+8+2投资法则大致可概括为5项投资逻辑、12项投资要点、8项选股标准和2项投资方式。

5 investment logics:

1. Because I regard myself as a business operator, I become an excellent investor; because I regard myself as an investor, I become an excellent business operator.

2. A good company is more important than a good price.

3. Pursue consumer monopoly enterprises all his life.

4. It is the real price of the company that ultimately determines the shares of the company.

5. There is no time to sell the best businesses.

12 investment points:
1. Take advantage of the stupidity of the market and invest regularly.

2. The purchase price determines the rate of return, even for long-term investment.

3. The compound growth of profits and the avoidance of transaction costs and tax burdens will benefit investors endlessly.

4. Don't care how much a company can earn in the coming year, only care about how much it can earn in the next 5-10 years.

5. Only invest in companies with high certainty of future returns.

6. Inflation is an investor's worst enemy.

7. The investment concepts of value and growth are interlinked; value is the discounted value of the future cash flow of an investment; growth is just a forecasting process used to determine value.

8. An investor's financial success is directly proportional to his understanding of the company he invests in.

9. "Margin of safety" assists your investment from two aspects; firstly, it buffers the possible price risk; secondly, it can obtain a relatively high rate of return on equity.

10. It is foolish to own a stock and expect it to go up next week.

11. Even if the chairman of the Federal Reserve secretly tells me the monetary policy for the next two years, I will not change any of my actions.

12. Ignore the ups and downs of the stock market, don't worry about changes in the economic situation, don't make any predictions, don't accept any inside information, and only pay attention to two points: A. What stocks to buy; B. Buying prices.

8 investment criteria:
1. Must be a consumer monopoly.

2. The product is simple, easy to understand and promising.

3. Have a stable business history.

4. Managers are rational and loyal, and always put the interests of shareholders first.

5. Financial stability.

6. High operating efficiency and good income.

7. Small capital expenditure and abundant free cash flow.

8. The price is reasonable.

2 investment methods:
1. The card is punched and held for life, and the following figures are checked once a year: A initial return on equity; B operating gross profit; C debt level; D capital expenditure; E cash flow.

2. Short-term arbitrage can also be considered when the market overestimates the price of holding stocks.

In a sense, card punching and lifelong holding of shares constitute the most unique and fascinating part of the Bashi method.

Investment motto:

Investors should not only focus on the stock price, but should pay attention to the invested company with the eyes of entrepreneurs and the mentality of the owner, see the true face of the investment target, and judge whether it has development potential and profitability, so as to Decide whether to invest.No matter how complex and changeable the market is, you must grasp the threshold of choosing investment targets.

(End of this chapter)