Learn to invest with Buffett

Chapter 6

Chapter 1 Section 5 Examine the invested companies like a boss

When buying stock, you are thinking of yourself as the owner of the business.

--Warren Buffett
"Investing in companies rather than stocks" is Buffett's investment philosophy.The essence of Buffett's investment philosophy lies in the prospects of investing in companies. He mainly invests in companies, not stocks.

One of Buffett's partners once said, "Unless you understand a business, you become a part of it."Buffett’s analysis of business operators focuses on three aspects: the first is honesty, only honest people can operate the business from the perspective of business owners; the second is to believe in conservative financial strategies, that is, to create the most wealth for shareholders with the least amount , he is particularly optimistic about the company's financial behavior of repurchasing its own stocks with retained earnings; third, if you don't like the way the company's managers spend money, don't invest in this company.
Buffett adhered to rational investment principles throughout his life, and only invested in companies themselves rather than stocks.Buffett's Berkshire investments include American Express, Coca-Cola, Gillette, The Washington Post, Wells Fargo and MidAmerican Energy.Sticking to this investment philosophy, Buffett has grown Berkshire from a textile mill on the verge of bankruptcy 40 years ago to a giant company with a net worth of $2001 billion in 1620.

The criteria for Buffett's investment company are: the selected company must have stable operations, simple products, sound financials, honest and rational managers, high operating efficiency, "economic goodwill", and relatively high "ownership income".In addition to this basis for selection, another very important point is that he can persevere for a long time and remain determined.The reason why Buffett is not easily copied by others is that he can consistently adhere to and abide by his own investment philosophy. When market conditions conflict with his investment philosophy, he would rather choose to temporarily withdraw from the market than give up his own philosophy.It is this unmoved by the market that enabled him to survive many stock market crashes in American history and successfully protect and create wealth for shareholders.

It is precisely because of Buffett's long-term and stable performance that he can give shareholders great persuasion, making them believe that in the future investment process, Buffett can still achieve the same success as before, because Buffett's past investment performance has made investors These shareholders fully understood his investment philosophy.

When the stock market fell in 1973, Buffett invested US$1000 million in The Washington Post. In the following four years, he successively invested an additional US$4 million. Since then, he has always owned the company's stock.The Washington Post has also proven to be a boon for Buffett and his Berkshires.However, not everyone can insist on owning the stock of a company for more than 4000 years without wavering. Unless he regards himself as the owner of the company, it is impossible for him to do this.
As a general investor, you should ignore market analysis or those views on macroeconomic trends, but focus your eyes on the company and industry you have chosen.All you do is to be like a true business owner who understands the strengths of the business, what it will do next, and its management.

Someone may ask, as a small investor, with limited funds, limited information, and even limited time to invest, how can it be possible to buy and own a business like Buffett?It seems that this fact can provide us with the most direct and convincing excuse to chase the market with peace of mind and ignore the intrinsic value of the enterprise.

In fact, small investors have the freedom and advantages that Buffett does not have, and we have a wider freedom to choose stocks.In addition, when you buy stocks, the operation is much simpler. You don't need to negotiate with others. Mr. Market will give you a quotation every day. The only issues you need to consider are the company and the price.
Some people may say that the amount of investment they have invested is not much, and of course there is no need to follow Buffett's method of buying companies.However, Buffett also said this:

"When I was running my partnership, I did a retrospective study of all the big deals and small deals I did. I found that we did far better on the big deals than the Achievements in small transactions. This phenomenon is not difficult to understand, because we will investigate many things before making each large investment, so we have a more thorough understanding of the company, and before making small investment decisions, We acted carelessly."

Many investors buy the stock of a certain company because they heard someone talk about it one night.You are unwilling to seriously understand and grasp some facts. You think that you have only bought a few hundred shares, so there is no need to bother.This rash habit makes investors seem so irrational when facing small investment projects with small amounts.It is precisely because investors have limited funds and spread them over several different stocks that all our transactions are destined to be small transactions.

Every investor should think carefully about where his problems lie. If you can really do a good job in every transaction—no matter how big the transaction is, your performance in the investment field may be much better.

Investment motto:

The essence of investment lies in what type of business to buy and at what price to buy the company you choose.Investors should look at the companies they invest in like a boss, so that they can make scientific and reasonable decisions.

(End of this chapter)