Warren’s secret for success investing from a business perspective…

  1. Warren will invest long-term only in companies whose future earnings he can reasonably predict
  2. Warren has found that the kind of company who se earnings he can reasonably predict generally has excellent business economics working in its favour.
  3. These excellent business economics are usually made evident by consistently high returns on shareholder’s equity, strong earnings, the presence of what warren calls a consumer monopoly, and management that functions with the shareholders’ economic interests in mind.
  4. The price you pay for a security will determine the return you can expect on you investment.
  5. Warren, unlike other investment professionals, chooses the kind of business he would like to be in and then let the price of the security and thus his expected rate of return, determine the buy decision.
  6. Warren has figured out that investing at the right prices in certain businesses with exceptional economics working in their favour will produce over the long term an annual compounding rate of return of 15% or better.

Warren Buffet’s investment philosophy from…

  1. Benjamin Graham
  2. Philip Fisher
  3. Lawrence N. Bloomberg
  4. John Burr Williams
  5. Lord John Maynard Keynes
  6. Edgar Smith
  7. Charlie Munger

How and why politics and businesses mix…

As corporations became more and more powerful, they started to usurp the power of the kingdoms. Thus, kings soon realised that it was in their best interest to limit the power of organised capital; they created laws that forbade the organisation of joint stock companies without the approval of the crown. Early examples of crown-approved joint-stock companies are the East India Company and the Hudson’s Bay Company, both with colourful and fascinating histories.

Inflation…

When the government spends more money, business benefits – lots of big government contracts and lots of people making more money. The merchant who was pricing the eggs at $1 for a dozen one day notices that people suddenly have more money to spend and are much more willing to pay higher prices for his eggs…. … …  The problem is that all prices rise to reflect the increase in the abundance of cash.

Effects of taxation and inflation of the rate of return..

Warren has often stated that real-world inflation and taxation greatly alter the investor’s return. He argues that if we live in a world of 5% inflation, our assets decrease in real purchasing power by 5% every year. For this very reason we invest our money. If we didn’t., our wealth, held in cash soon would lose its purchasing power…. … taxation adds another perspective to the situation. If we manage to obtain a 5%n return on our money, income taxes can take 31% of that 5%, which means that we will be left with a real return of 3.45%.

Focus portfolio…

Warren has adopted the concentrated –portfolio approach, which means that h holds a small number of investments he really understands and intends holding for a long period of time. This allows the question of whether to allocate capital to an investment to be approached with the utmost approach. Warren believes that it is the seriousness with which he addresses the questions of what to invest in and at what price that decreases the risk. It is his commitment to the strategy of investing only in exceptional businesses at prices that make business sense that reduces his chance for loss.