- Warren Buffett's contemporary investment style - buying very profitable large cap companies with sizeable moats at fair prices might not be the best strategy for people like you and me (Portoflio value < $10 million USD)
- Warren Buffet has shifted his investment style from Benjamin Graham philosophy since 1950 - he turned to finding good businesses at decent prices instead of look for classic benhamin Graham value stock (like what he did when he ran his investmenet partnership.)
- Warrent Buffet's stock selection process become very simple and only consists of 4 filters:-
- We have to deal in things we’re capable of understanding, and then, once we’re over that filter, we have to have a business with some intrinsic characteristics that give it a durable competitive advantage, and then, of course, we would vastly prefer a management in place with a lot of integrity and talent, and then, finally, no matter how wonderful it is it’s not worth an infinite price so we have to have a price that makes sense and gives a margin of safety given the natural vicissitudes of life.
- Warrent Buffet hold his investment for an exceptionally long time - he holding on his investments for decades of life.
- Our favorite holding period is forever.
- Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.
- Investor seem to think that the best strategy for success is to buy firms with deep moats at adequate prices and to hold them forever. Typically this means buying medium or large cap companies that have been in the spotlight for years — firms with market capitalizations that reach well beyond a billion dollars. Unfortunately, this strategy is far from ideal, and could be outright dangerous.
- Warren Buffett is great at assessing people, able to sport trends and draw conclusions based on details that a typical investor might not even notice, and judging whether a business has a strong competitive advantage or not - everybody can recognize a competitive advantage after it’s been pointed out but picking them beforehand is a whole other story.
- Even, Seth Kalrman doesn't think he can do it well. Seth Kalman said that "I think Buffett is a better investor than me because he has a better eye for what makes a great business. And, when I find a great business I’m happy to hold it …most businesses don’t look so great to me."
- Joel Greenblatt share his view - "The problem is that you’re not likely to be the next Buffett or Lynch. Investing in great businesses at good prices makes sense. Figuring out which are the great ones is the tough part. Monopoly newspapers and network broadcasters were once considered near perfect businesses; then new forms of competition and the last recession brought those businesses a little bit closer to earth. The world is a complicated and competitive place. It is only getting more so. The challenges you face in choosing the few stellar businesses that will stand out in the future will be even harder than the ones faced by Buffett when he was building his fortune. Are you up to the task? Do you have to be? Finding the next Wal-Mart, McDonald’s, or Gap is also a tough one. There are many more failures than successes."
- Warren Buffett will perform valuation on the selected company. But, the intrinsic value is not easy to be computed. It is very easy to be off by a small margin on any one of your assumptions that make up discounted cash flow. If you’re off by more than a hair, you will inevitably be off on your assessment of intrinsic value by a large margin.
- The calculation of intrinsic value, though, is not so simple. As our definition suggests, intrinsic value is an estimate rather than a precise figure, and it is additionally an estimate that must be changed if interest rates move or forecasts of future cash flows are revised.
- A margin of safety is there to absorb the errors you make, and guard against uncertainty. It’s unfortunate, then that investors who are emulating Warren Buffett are electing to invest in wonderful companies at fair prices rather than fair companies at wonderful prices. Overestimating the value of a company can lead to significant losses.
- Warren Buffett moved away from Benjamin Graham's investment style because his portfolio grew far too large to take advantage of classic Benjamin Graham investment opportunities. And, he was able to rack up the best investment results by using Graham strategy during 1950s and 1960s.
- Warrent Buffet - "Yeah, if I were working with small sums, I certainly would be much more inclined to look among what you might call classic Graham stocks, very low PEs and maybe below working capital and all that. Although — and incidentally I would do far better percentage wise if I were working with small sums — there are just way more opportunities. If you’re working with a small sum you have thousands and thousands of potential opportunities and when we work with large sums, we just — we have relatively few possibilities in the investment world which can make a real difference in our net worth. So, you have a huge advantage over me if you’re working with very little money."
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