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April 21, 2013

Golden Rules of Value Investing from Warren Buffett

by Futurecaps Advisor

1. Identify Great Business

ROE > 15%

Sales Growth & Net Profit Growth  (20% above means good growth)

High Percentage of Net Profit (20% above means it has some pricing power)

Brand Name, Unique Pricing Power

Current Debt < 3x Net Profit

 

2. Buy them at Discount

Intrinsic Value > Market Price (5 year past & 10 year present)

Promoter is Buying

 

SELL WHEN

  1. Permanent Problem with Company
  2. Upcoming Market Crash Signaled through INDEX PE RATIO at Historical Peak Times
  3. Intrinsic Value lesser than Current Market Price of company
  4. Better Company identified that can give more returns

 

Note

Following businesses are high competition involved:

  1. Automobile
  2. Telecom
  3. Airline
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