Warren Buffett has shared his wisdom and investing strategies can be summarized in three simple rules.
- Circle of Competence. Buffett stresses the importance looking at companies that are within his areas of expertise. He wants to know how a business makes money. In addition, he wants to be confident on the sustainability of its profit streams over the long-term. He called the process “judging the future economics of a business.”
- Piece of a business. He was greatly influence by #Ben Graham’s classic “The Intelligent Investor.” The book’s key tenet is to look at each stock purchase as buying a slice of a business and avoid being distracted by stock price movements.
- Margin of Safety. When Buffett analyzes a prospective investment, he wants the value at his entry price to be much lower than his value estimate for the company. The difference between the two figures is his “margin of safety.”
Buffett shared his views on these subjects and many others at the annual Berkshire Hathaway meeting held this past week. One of his more controversial comments pertained to #gun rights.
“I don’t believe in imposing my political opinions on the activities of our businesses.” “I don’t think we should put a question on the Geico policy form [that says]: ‘Are you a member of the NRA? And if you are, you’re just not good enough for us.’ Or something like that.”
After he delivered his answer, the crowd at the CenturyLink Center erupted in massive applause.