Warren Buffett Investment Strategy

Warren Buffett Investment Strategy has reached mythical proportions. Warren Buffett is considered to be one of the greatest investors of our time. His success in investment has turned numerous heads as to his secret in the investment world. Under his leadership alone, He has ushered his company Berkshire Hathaway Inc. to becoming worth more than 300 billion dollars.

Buffett’s net worth alone is valued at more than 70 billion dollars. Buffet was ranked as the world’s wealthiest person in 2008 and in 2012 he was named by Times as one of the world’s influential people. Warren Buffet began his career as the Chairman and CEO of Berkshire Hathaway Inc. in 1970. This was the beginning of his legacy as one of the most successful stock investors in the world. Currently, many investors chase Buffett’s stock investments each quarter and there are many lessons that can be learned by following and understanding the oracle of Buffett’s career.
Buffett’s philosophy to Investment

Warren’s philosophy follows the Benjamin Graham School of value investing. Buffett uses investing tenets to guide him in making his investing decisions. These 12 investment principles are categorized in different areas specifically business, management, financial measures and value. Buffett’s strategies are to understand and may seem as clichés, but they are very difficult to implement in one’s investment decisions. Here are Buffett’s principles of investment:

1. Never follow the daily fluctuations of the stock market.

The market only exists to facilitate the investor in buying and selling of stock, not to set values. An investor needs not the market’s validation for the purchase of shares. An Investor will run into trouble whenever he tries to make the market a predictor of future share prices.

2. Don’t worry about or try and worry about the general economy

The best approach is to acquire a business which has a realistic opportunity to progress without regard to whether the overall economy is expanding or contracting. A business which has the ability to profit in any economic environment is very valuable.

3. Buy a business, not its stock

Treat a stock purchase as if you were buying the entire business, the investor should consider the company’s operations, whether its long-term prospects are favorable and whether it is operated by competent and honest people and if it is available at attractive price.
The decision to acquire a business should be based the following tenets:

Business Tenets

1-Is the business straight forward, understandable and simple from your perspective as an investor?
2- Is the business’s operating history consistent?
3- Does the business have favorable long-term prospects?

Management Tenets

1. Is management rational?

2. Is management honest and reliable with its shareholders?

Financial Tenets

• Investors should not focus on the earnings per share; they should focus on the return on equity instead.
• Investors should search for companies with a high profit margin, because it means that their products are of high demand.
• Investors should calculate the “Owner earnings”
• Has the company created at least one extra dollar of market value for every dollar of retained earnings?

Management Tenets

• The value of the business should be put into consideration.
• Can the business currently be purchased at a significant discount to its value?
• Manage the business portfolio

Intelligent investing should not be based on short term gains; it should be based on long-term value. The investor should have the priorities of a business owner.

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Warren buffett investing strategy

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Warren Buffett strategy