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Why Warren Buffett Reads Annual Reports

Why Warren Buffett Reads Annual Reports

Most investors never review company annual reports. It’s easy to understand why. Full of facts, figures and detailed accounting notes, these reports are hard going. They’re not exactly bedtime reading. However, annual reports often contain valuable information for investors. As such, they shouldn’t be overlooked, no matter how dry the material is. So, what’s the best way to read these reports? Is there anything we should be on the lookout for that might provide insight into a company’s financial position…

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Warren Buffett: How Phil Fisher’s Scuttlebutt Method Should Be Used

Warren Buffett: How Phil Fisher’s Scuttlebutt Method Should Be Used

In 1960, Warren Buffett read a book that changed his investment mentality forever. The book was called “Common Stocks and Uncommon Profits,” and it was written by Phil Fisher in 1958. In the book, Fisher described what he called the scuttlebutt method for finding investments. This method was the process of discovering as much about a company and its products as possible. To do this, Fisher recommended interviewing competitors as well as listening to rumours on the business “grapevine.” He…

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Mohnish Pabrai: Avoid Stocks You Don’t Understand

Mohnish Pabrai: Avoid Stocks You Don’t Understand

The highly successful growth investor Peter Lynch once advised investors to “buy what you know.” Another way to interpret this is to buy what you understand. Lynch isn’t the only successful investor that has recommend the principle of sticking to companies you understand. Warren Buffett, Charlie Munger, Seth Klarman and Mohnish Pabrai have all stated that this one of the essential principles in the world of finance. Warren Buffett calls his sphere of understanding his circle of competence. He will…

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Lessons from Wall Street’s Four Great Bottoms

Lessons from Wall Street’s Four Great Bottoms

Professor Russell Napier spends most of his time studying financial markets. Author of The Solid Ground investment report for institutional investors and co-founder of the investment research portal ERIC, Russell has been writing global macro strategy for institutional investors since 1995. He’s also a student of financial mistakes. He set up the not-for-profit Library of Mistakes in 2014, a library dedicated to avoiding mistakes. The professor set the Libary up with the simple goal of educating the financial world about…

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How Phil Fisher’s “Common Stocks and Uncommon Profits” Changed Warren Buffett’s View Of Investing

How Phil Fisher’s “Common Stocks and Uncommon Profits” Changed Warren Buffett’s View Of Investing

Warren Buffett was taught how to invest by Benjamin Graham, who is considered to be the Godfather of value investing. In the early years of his career, Buffett followed Graham’s style of investing closely. He concentrated his efforts on finding so-called “cigar-butts,” stocks trading at bargain-basement valuations due to structural issues.  Here’s Buffett explaining the approach in his 1989 letter to Berkshire Hathaway shareholders:  “If you buy a stock at a sufficiently low price, there will usually be some hiccup…

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What Warren Buffett’s See’s Candies Can Teach Us About Business

What Warren Buffett’s See’s Candies Can Teach Us About Business

Many business owners and managers believe that growth is the single most crucial factor in defining a company’s success. Nowhere is this trend more evident than the tech sector. Companies like Uber and WeWork have filled the past few years spending tens of billions of investors’ capital growing their top lines without any prospect of a positive return on this investment. These are not the only companies spending billions without any visible return. Companies of all shapes and sizes regular…

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4 Rules For Becoming A Bad Investor

4 Rules For Becoming A Bad Investor

I recently re-read one of Charlie Munger speeches from 1986 to students of the Harvard Westlake business school. In the speech, Munger laid out his rules for living a miserable life, in an attempt to warn students away from these actions.  The full speech is published in Munger’s unofficial biography, Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger. It is well worth seeking out if you’re interested.  After reading Munger’s words, I’ve been inspired to create my…

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A Case Study Of Why Warren Buffett Bought Disney In 1966

A Case Study Of Why Warren Buffett Bought Disney In 1966

A few weeks ago I wrote an article for GuruFocus outlining one of Warren Buffett’s biggest mistakes of all time; selling Disney.  Buffett first noticed Disney back in 1966. The company at the time was selling for $80 million in the market with a debt-free balance sheet, significantly below what Buffett’s estimate of intrinsic value for the business. Smelling a bargain, Buffett invested $4 million of his partners’ money to buy a 5% stake. A year later, he sold this…

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Hidden Value Stocks

Hidden Value Stocks

I’ve not been able to post on this blog recently because I’ve been working flat out on a new business venture with my partner called Hidden Value Stocks. This is a stock newsletter focused on small, value-focused hedge funds and partnerships all of which are trying to emulate the success of Warren Buffett’s early partnerships by finding hidden value stocks. Published every quarter, each issue of Hidden Value Stocks contains two interviews with under the radar fund managers. In the interviews, these managers…

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Seth Klarman: Approach Investing With a “Strict Standard of Risk Avoidance”

Seth Klarman: Approach Investing With a “Strict Standard of Risk Avoidance”

Investing is hard. To be able to outperform the market consistently, you need to be able to predict the future. Unfortunately, predicting the future is impossible. So, investing is a game of probabilities. Estimating the probabilities of individual outcomes and then investing in the scenario with the highest likelihood of success. As it is impossible to predict the future, it is best to include a wide margin of safety in the calculation of the probabilities. First proposed by Benjamin Graham,…

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