(THIS is a continuation of Part 1 from last week’s weekend edition of Asian Journal)
Multi-billionaire Warren Buffett lives simply and adheres to basic but savvy investment principles.
6. Buy companies cheap
• Warren Buffett is value investor.
• He calculates an intrinsic value by examining what similar companies sell for.
• He calculates the present value of cash that will be generated in the future.
• He likes companies with good returns, solid operating margins, and low debt.
• He likes companies that generate cash that they invest well and return to shareholders as dividends.
• He looks back five years or more for consistent operating history.
• He gauges how well a company does in good times and bad.
• He pours over long histories, not just the latest quarter.
7. Hold for life
• Buffett’s favorite holding period is quite long as in forever.
• He finds great companies with cheap valuations and holds them forever.
• If you panic as your holdings dip, you should not be in the stock market.
8. Look for companies with economic moats
• Companies with wide economic moat maintain competitive edge.
• A wide moat acts as a barrier to make it hard for potential competitors to enter your market.
• Moat could be brand power, high cost to get into business, or patent protection.
• These companies have strong global brand, efficient distribution system that is hard to duplicate.
• Think Coca-Cola, Home Depot, or Boeing.
9. Buy big, concentrated positions
• When Buffet finds a company he really likes, he buys into it big time.
• You and I can probably buy 50 or 100 shares. He buys big, sometimes to control a company.
• We ordinary souls can’t do this. We don’t have his resources. So let’s skip this one.
10. Believe In America
• Believe in America, whether you are a Democrat or Republican.
• Buffett doesn’t tweak his portfolio to suit whoever is in the White House.
• He invests in the U.S. economic system of good ol’ USA.
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Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation in Pasadena, California.
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He has 50 years of experience in defending taxpayers audited by the IRS, FTB, EDD, BOE and other governmental agencies. He is publishing a book on his expertise – “HOW TO AVOID OR SURVIVE IRS AUDITS.” Our readers may inquire about the book or email tax questions at email@example.com.