10 Ways to make money the Warren Buffet way !

This is on PPT a must read. I think traders wont like this but long term investors will surely like it.

Source of PPT.

How Warren Buffett picks stocks in a bear market?

In times of economic decline, many investors ask themselves, 'What strategies does the Oracle of Omaha employ to keep Berkshire Hathaway on target?'

The answer is that the esteemed Warren Buffett, the most successful known investor of all time, rarely changes his long-term value investment strategy and regards down markets as an opportunity to buy good companies at reasonable prices.

In this article, we will cover the Buffett investment philosophy and stock-selection criteria with specific emphasis on their application in a down market and a slowing economy.

The Buffett Investment Philosophy

Buffett has a set of definitive assumptions about what constitutes a 'good investment'. These focus on the quality of the business rather than the short-term or near-future share price or market moves. He takes a long-term, large scale, business value-based investment approach that concentrates on good fundamentals and intrinsic business value, rather than the share price.

Buffett looks for businesses with 'a durable competitive advantage.' What he means by this is that the company has a market position, market share, branding or other long-lasting edge over its competitors that either prevents easy access by competitors or controls a scarce raw-material source.

Buffett employs a selective contrarian investment strategy: using his investment criteria to identify and select good companies, he can then make large investments (millions of shares) when the market and the share price are depressed and when other investors may be selling.

In addition, he assumes the following points to be true:

• The global economy is complex and unpredictable.
• The economy and the stock market do not move in sync.
• The market discount mechanism moves instantly to incorporate news into the share price.
• The returns of long-term equities cannot be matched anywhere else.

Buffett Investment Activity

Berkshire Hathaway investment industries over the years have included:

Insurance
Soft drinks
Private jet aircraft
Chocolates
Shoes
Jewelry
Publishing
Furniture
Steel
Energy
Home building
The industries listed above vary widely, so what are the common criteria used to separate the good investments from the bad?

Buffett Investment Criteria

Berkshire Hathaway relies on an extensive research-and-analysis team that goes through reams of data to guide their investment decisions.

While all the details of the specific techniques used are not made public, the following 10 requirements are all common among Berkshire Hathaway investments:

1. The candidate company has to be in a good and growing economy or industry.
2. It must enjoy a consumer monopoly or have a loyalty-commanding brand.
3. It cannot be vulnerable to competition from anyone with abundant resources.
4. Its earnings have to be on an upward trend with good and consistent profit margins.
5. The company must enjoy a low debt/equity ratio or a high earnings/debt ratio.
6. It must have high and consistent returns on invested capital.
7. The company must have a history of retaining earnings for growth.
8. It cannot have high maintenance costs of operations, high capital expenditure or investment cash flow.
9. The company must demonstrate a history of reinvesting earnings in good business opportunities, and its management needs a good track record of profiting from these investments.
10. The company must be free to adjust prices for inflation.

The Buffett Investment Strategy

Buffett makes concentrated purchases. In a downturn, he buys millions of shares of solid businesses at reasonable prices.

Buffett does not buy tech shares because he doesn't understand their business or industry; during the dotcom boom, he avoided investing in tech companies because he felt they hadn't been around long enough to provide sufficient performance history for his purposes.

And even in a bear market, although Buffett had billions of dollars in cash to make investments, in his 2009 letter to Berkshire Hathaway shareholders, he declared that cash held beyond the bottom would be eroded by inflation in the recovery.

Buffett deals only with large companies because he needs to make massive investments to garner the returns required to post excellent results for the huge size to which his company, Berkshire Hathaway, has grown.

Buffett's selective contrarian style in a bear market includes making some large investments in blue chip stocks when their stock price is very low.

And Buffett might get an even better deal than the average investor: His ability to supply billions of dollars in cash infusion investments earns him special conditions and opportunities not available to others. His investments often are in a class of secured stock with its dividends assured and future stock warrants available at below-market prices.

Conclusion

Buffett's strategy for coping with a down market is to approach it as an opportunity to buy good companies at reasonable prices.

Buffett has developed an investment model that has worked for him and the Berkshire Hathaway shareholders over a long period of time. His investment strategy is long term and selective, incorporating a stringent set of requirements prior to an investment decision being made.

Buffett also benefits from a huge cash 'war chest' that can be used to buy millions of shares at a time, providing an ever-ready opportunity to earn huge returns.
Source - Rediff.com (Actual article is from Investopedia but I extracted it from Rediff)

How to identify Multibagger Stocks?

Rakesh Junjunwala rightly defined the stocks markets as "Markets are like women always demanding, unpredictable and volatile." No one know whats next. For an instance take it - Does any one knows when this recession is going to end ? No, no can say it accurately, one can just predict but as all know that the future is uncertain.
But what one can do is spot out some value stocks in this badly beaten markets and think of long term investment in them. But a question comes here that which company to invest in?
The answer to the above question is invest in the company in which you have faith and confidence and more over of which you are aware of.

Here are few easy steps to identify Multibagger stocks.

1. Go for a company which gives regular dividend. Dividend paying stocks mostly lie in A group category.
2. Preferably go for a Mid cap stock which in future can become a large cap. Mid cap stock have a greater chance to move upwards and that to fast. Preferable a stock whose market cap is less than 1000 Crores.
3. Go for a stock in a particular sector which is in boom.
4. Look out for the companies financial. In this check out the companies profit f last 4-5 years and check it out that it is increasing every year. One can also check out EPS of the company.
5. Check out whats running these days, Say for example there is a invention of a new technology which will be in demand in a near future. An excellent example is invention of 3G. Even TATA Nano can be taken in consideration as it is only one of its kind being the cheapest car in the world.
6. Check out for a companies order value. There are various companies which have a good amount of orders for future which are of great importance to a company.
7. One can also look out for a company which has good amount of land / property. Unitech had a lot of lad which can in the eyesight by end of 2005. An investment of Rs 40,000 then would be worth over 1 crore by the end of 2007.
8. Last and not the least be confident in your stock.

Few don't s in selecting a multibagger stock.

1. Don't select a Penny Stock.
2. Don't loose hope in your company.
3. Don't depent on others , do your own research.

Happy Investing.

Is Stock Market Investing Gambling.

One of the biggest myth among many people is that they think stock market investing is just like gambling.
I have mentioned this in my earlier list.
People shy off from investing as they think it is gambling.
Many of our parents and grand parents didn't invest as they thought investing is just like gambling otherwise all of them have been just like Warren Buffet. If not at lest multi-millionaire.

Meaning of Investing and Gambling.
Merriam-Webster's first definition for "invest" is : "to commit (money) in order to earn a financial return." And the second definition is "to make use of for future benefits or advantages."

What about "gamble"? The first meaning is "to play a game for money or property" and the second is "to stake something on a contingency."

Some say it (Investing) is very much like gambling. While some say its myth comparing stock markets with gambling.
What I feel - In true sense if you go and see investing is buying the stock buy predicting the future (fundamentally or technically)with a sole aim to earn a profit. While in gambling you cant predict any future , people blindly put money without knowing the future.

There are some important differences here, though. Investment brokers may live off salaries or commissions, but the day trader depends directly on the market for income. The gambler may have a lot of good days, but the bad week will sap the earnings from a few good days. There is no doubt that the psychology behind gambling and active trading seems alarmingly similar, while gambling is considered illegal and illicit in many parts of the world, or at least looked down upon, day trading is mysterious and high sounding.

My point is that if you study the trends of the stock market, you can always gain with minimal (if any) loss. Gambling precludes some level of loss (and hopefully gain) -- even the best poker players have lost money, although they feel that their skills can outwit most casual players.

The other difference is the expectation. Gamblers don't go to Las Vegas with $100 hoping to come back with $115. They want to double or triple their money quickly. Investing is slower. You hope to double or triple your money, but over decades, not minutes or hours.

Markets depend on trends . Gambling is to go by flow.
Study and knowledge in markets is essential. In gambling a good knowledge base is not required , it depends on luck.

At the end I won't say stock market is not gambling , a bit of it is gambling i.e. Day trading. There are speculators (gamblers) in stock markets who may act as a bear or even a bull which affects the price of the stock on a high level on routine basis.
Take for an instance a few week ago rumors for ICICI bank becoming bankrupt were spread by a broker in Mumbai. So he speculated the stock price.

Shying of investing in Stock is not done. Warren Buffet became rich by investing. So can you.

Happy Investing.

Few things you would love to know about Warren Buffet.

A video worth watching.
This is a video on Warren Buffet and His secrets are revailed.
He is my Role Model.
Watch It.

Common Myths and Excuses in investing

Many shy off investing as they think its a waste of time and they can loose their hard earned money in no time as markets are volatile.

Common Myths and Excuses

• Its Gambling
• There are many speculators.
  
• I don't have time to invest.
• I'm too young to invest.
• People only loose money in Stocks.
• Its too late to invest now.
• I don't know how to start investing in the stocks
• I'm a girl, and girls don't invest
• My spouse does the investing
• Stocks don't give good returns
• Investing in stocks is useless, I only invest in FD's
• I invest in Gov Bonds.
• My dad has lost money in Stock Markets and so I dont want to invest.
• Bad times (Recession) phase in Stock market are longer than a bull run.

I suggest forget all this and start investing as recession period is the best time to pick up value stocks and become like Warren Buffet.
Warren Buffet now the worlds richest person and he has made his billions just by investing in stocks. You can be one like him. He never hesitated while investing.

I invest and I am happy to do so.

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