Fm warren buffet 28032015_anna

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1 THE WARREN BUFFET WAY Investment Strategies of the World’s Greatest Investor By Robert G Hagstrom Presented by: Roziana Mohammad (PBS 1331432)
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  1. 1. 1 THE WARREN BUFFET WAY Investment Strategies of the Worlds Greatest Investor By Robert G Hagstrom Presented by: Roziana Mohammad (PBS 1331432)
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  3. 3. 86 years old An investment guru No. 4 richest man in 2014 one of the richest Most successful stock market investors for the past 30 years CEO of Berkshire Hathaway investing in stocks and buying companies Mentor : Benjamin Graham (Father of value investing and Dean Wall Street Theory : Mr Market and Margin of Safety A mix approach investment from Ben Graham and Philip Fisher Source : Forbes 2014 WARREN BUFFET THE ORACLE OF OMAHA 3
  4. 4. Only buy stocks at a price that is well below an intrinsic value of the business determined by assets, earnings, dividends and future values Provides high-return opportunities but also gives some protection on the downside if things don't work out as planned Principle No. 1: Always Invest With a Margin of Safety Principle No. 2: Mr MARKET Expect Volatily and Profit from It Mr Market as a business partner who offers to buy or sell you his interest daily. Price could be high or could below and an investor you are free to buy his interest, sell out to him or ignore if you dont like the price. He will always come back tomorrow with a different offer. Have freedom to say no and think rationally. BENJAMIN GRAHAM FATHER OF VALUE INVESTING 4
  5. 5. Type of Investors Defensive Aggressive/Enterprise Investors Based on willingness and ability to bear on the task Eg. Doctor not able to spend too much time to the process Focus on shares of companies that have strong financial background and long term profitable companies Eg. a sharp young executive interested in finance) Expand their universe substantially, but purchases should be attractively priced as established by intelligent analysis Understanding the business and economic conditions Portfolio diversification Highly believer in defensive investing and protecting a portfolio against errors in judgment Recommends purchase of a minimum of 10 different issues and a maximum of 30. Low risk, good return, buy and hold for long term Stock holdings should be reviewed at least annually, focus on dividend returns and the operating results of the company, and ignore share price fluctuations Take advantage on the market fluctuation on the upside stocks overvalued Have some understanding of business and economic conditions and will form some opinion concerning the prospects of a firm or industry Use Historical data historical rates provide a starting point, not representing future but it gives some indicatives of future rates Use the proper historical rate requires considerable investment judgment Make decision based on quantitative than qualitative factors BENJAMIN GRAHAM INVESTMENT PRINCIPLES 5
  6. 6. I am 85% of Benjamin Graham Risk comes from not knowing what you're doing -Warren Buffet- Combo investment approach of Ben Graham and Philip Fisher Rule No. 1: Never Lose Money, Rule No. 2 : Never Forget Rule No. 1 Be a sensible investor.. Dont be frivolous Dont gamble Dont go into an investment with a cavalier attitude Be informed on the companies operating results not by the short term fluctuations Be patient and go for the value of business Do your homework if you know more about a company, why give more attention on what market says? Buy shares because you believe in the company intend owning it for number of years NEVER FOLLOW THE DAY TO DAY FLUCTUATIONS OF THE STOCK MARKET ONLY check the market for anyone who sells a good business at a GREAT PRICE!
  7. 7. Dont try and analyse or worry about the general economy If the business does well, the stock eventually follows. Impossible to predict the stock on daily basis Impossible to forecast what the economy will do in the next 5 years Dont assume that that the direction comes from the economy predicted Find a business that exhibit favourable for LONG TERM prospects more VALUABLE Does the company :- Have a CONSISTENT operating profit? Have a DOMINANT franchise? Is the business generating HIGH and SUSTAINABLE profit margins? A business that has ability to PROFIT in ANY economic environment is very VALUABLE! 7
  8. 8. It is better to buy a wonderful company at a fair price than a fair company at a wonderful price Buy a business NOT a stock Buy QUALITY stocks and look for a company with.. Business operations that are UNDERSTOOD FAVOURABLE long term business prospects Operated by HONEST and COMPETENT people Available at an ATTRACTIVE price Assess companies based on :- Business tennets Simple and understandable business? Operating History? Profitable/Good Prospects? Management tennets Rational management? Honest with its shareholders? Financial tennets Return on equity not EPS, calculate owner earnings, search companies with high profit margins, for every $1 of retained earnings, has the company created at least $1 worth of extra value? Market tennets Value of business? Right company at the right price with MoS against unknown risk? 8
  9. 9. Act like a owner of the business and NOT the owner of a piece of paper Manage a portfolio of businesses UNDERSTAND the companys operating fundamentals DIVERSIFICATION only required when the investor does not know what they are doing. NOT MANY business owners are COMFORTABLE AND EXPERIENCED to operate a number of companies portfolio at the same time. Only BUY shares at the companies which are thoroughly UNDERSTOOD Perfect timing is where, we simply attempt to be fearful when others are greedy and to be greedy only when others are fearful
  10. 10. In the nutshell.. Buffets investment strategy is to locate wonderful companies with long term value and fairly priced stock. He understands the business that he is comfortable with, and acts like a business owner rather that a stock market speculator. He champions the value investment strategy, maintains a longer perspective at all times, and never loses sight of the underlying value of a business. 10
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