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Takeda will sell his stake. He told me he has developed the habit of being thankful one thousand times per day and it is the key to his
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The secret to good investing is to wait. I won’t let you do anything before you’re ready and the market is ready.”
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First, my talisman to remind me to be thankful for my problems—Maro
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Books were a good idea, though. I piled up other books to serve as a laptop stand: additional copies of Rule #1, Payback Time, and The Education of a Value Investor; Yvon Chouinard’s Let My People Go Surfing; Gretchen Rubin’s The Happiness Project; and Atul Gawande’s Complications. I put The Life-Changing Magic of Tidying Up on the stack of books to remind me to be tidy and efficiently ruthless in the organization of my finances, and The Big Short, to remind me that I had to look deeper than surface level and think about macroeconomic forces in the market, and that things can go very wrong
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space, even these small things, made me feel more in control.
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I follow a kind of simple outline to create a Story about a business: meaning, management, Moat, Margin of Safety.
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Writing it down forces me to be precise.
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and I can also see that we should expect funds to exit if a long-term Event happens. I should not get freaked out by that.”
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Irrational Exuberance,
“If you watch the Shiller P/E and the Buffett Indicator, you’ll have a good sense of where we are in the economic cycle. And where we are now is at the top.”
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it must be a business he is capable of understanding
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it must be a business with some intrinsic characteristics that
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give it a durable competitive advantage 3. he would like it to be a business that has management with integrity and talent and 4. it must be a business that he can buy for a price that makes sense and gives a Margin of Safety.
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Events were a way to use my fear as a lever to get incredible investing results.
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waiting. To be ready to act aggressively when fear is everywhere seems to be one of the great paradoxes of Rule #1 investing.
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“Let’s make the three circles what you’re passionate about, what you vote for with your money, and where you make your money.”
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Here’s a free website, InvestSnips, that has an ‘Industries’ tab. Click it and scroll down to ‘Category Links’ and you’ll see about 450 categories, from Advertising to Zinc.
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Everyone running a fund of $100 million or more must report quarterly to the SEC the equity positions they have bought and sold in the previous quarter.
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“you’re right. It’s my favorite way to find great investments. There were two
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Dad looks to Buffett and Munger, obviously, but also Mohnish Pabrai, Guy Spier, David Einhorn, Bruce Berkowitz, and a bunch of others.
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market goes up, the strong ones will go up more than the weak ones and they’ll make money on the difference; same thing if the market goes down, but in reverse—the weak companies will drop faster and farther than the strong companies. Watching the 13F filings can be misleading if you aren’t aware of the whole picture, but even so, following the 13F filings of the
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The Buffett Bible was exactly as good as my dad had described. Buffett has an incredible ability to explain financial concepts to Normals like me, and that is rare.
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In Buffett’s investing strategy, this concept is referred to as a Moat.
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“It’s not at all. This is competitive advantage that can’t easily disappear.
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“Is a company you’re researching just trying to compete with a ‘me too’ product that is priced lower than competitive products? Are some of these companies making typewriters at the beginning of the personal computer? Are these going to be going strong in ten years, or maybe not?”
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The Five (and a Half) Moats
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BRAND.
SWITCHING.
NETWORK EFFECTS.
TOLL BRIDGE
SECRETS.
PRICE.
Do you really want to serve up generic cola at your party? I mean, c’mon.
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“Competitors attack a Moat in basically two ways,” he said. “First, by saying, I’m going to do what you do, but cheaper or better; or two, I’m going to do something that eliminates the need for you.”
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Any time they use “adjusted earnings” or “EBITDA” (“earnings before interest, tax, depreciation, and amortization”), be suspicious and skeptical.
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A big, durable Moat should let the future look a lot like the past.
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I named the growth rate that I was supposed to choose the Windage Growth Rate.
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It was up to me to be conservative with a lower estimate
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Buffett once said that you should only invest in a business an idiot could run, because one day an idiot will.”
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Management Numbers: (1) Return on Equity, (2) Return on Invested Capital, and (3) Debt
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RETURN ON INVESTED CAPITAL (ROIC) = NET INCOME / (EQUITY + DEBT)
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“Debt. Debt can be corrosive, and if they have a lot, it might
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The Lemonade Stand has: $1,000 of equity $1,000 of debt $2,000 total The company made $100 on that money. The ROE is 100 / 1,000 = 10% The ROIC is 100 / (1,000 + 1,000) = 100 / 2,000 = 5%
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I discovered a cool shortcut to checking
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My Checklist
You don’t have all the time in the world. You’ve got to be strategic about this. Choose an industry you like, one you know something about the companies in and want to learn more about, and go deeply into it.”
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it. And stay far away from the edge of your Circle of Competence.
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They say write what you know; he invests in what he knows.
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Find the price that is reasonable, and then, still don’t buy it—in other words, wait till the price is even lower than reasonable.
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Buffett was saying you should feel confident you can make a rough estimate of future production, and if it will be higher than today, then buy the entire house, farm, company, whatever, for a price that is ten times the current Owner Earnings.
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