Warren Buffett's favorite book:
Securities Analysis by Ben Graham
Here are the most powerful lessons every investor should know:
Securities Analysis by Ben Graham
Here are the most powerful lessons every investor should know:
1. Investing versus speculating
Investors make decisions based on the facts and value of the asset.
Speculators make decisions based on other participants' behaviors.
Know the difference:
Investors make decisions based on the facts and value of the asset.
Speculators make decisions based on other participants' behaviors.
Know the difference:
2. Good business vs. bad business
Graham defines in simple terms what makes a business "good".
The inverse of these conditions makes it "bad."
Investors should focus on buying good businesses.
Graham defines in simple terms what makes a business "good".
The inverse of these conditions makes it "bad."
Investors should focus on buying good businesses.
3: Left brain + right brain thinking
The numbers are essential, but Graham believed good analysis must include qualitative factors, too.
The numbers are essential, but Graham believed good analysis must include qualitative factors, too.
4: "Intrinsic value" is a moving target.
The value of a business changes over time. It's not a fixed number.
Investors must understand that value of a business is dynamic and subject to change.
The value of a business changes over time. It's not a fixed number.
Investors must understand that value of a business is dynamic and subject to change.
5: Focus on earnings power
The bigger the fluctuations in a company's earnings, the less reliable your valuation analysis will be.
Focus on companies with predictable futures.
The bigger the fluctuations in a company's earnings, the less reliable your valuation analysis will be.
Focus on companies with predictable futures.
6: Use history, not just the latest earnings report.
Rather than emphasizing the recent results, Graham averaged the companies' history.
Look further back at a company's operating results before you conclude.
Rather than emphasizing the recent results, Graham averaged the companies' history.
Look further back at a company's operating results before you conclude.
7: Change is not something to profit from, but guard against.
This is a core principle that Buffett has put into practice for decades.
This is a core principle that Buffett has put into practice for decades.
8. Think like a private business owner:
- How much money must I put up?
- How much cash will I get back?
- How fast?
"Why should investors in publicly traded stocks ask different questions?"
- How much money must I put up?
- How much cash will I get back?
- How fast?
"Why should investors in publicly traded stocks ask different questions?"
9: Focus on dividends & income, not the future price.
Don't just count on capital appreciation. Focus on income & dividend potential first and capital appreciation as a bonus.
This shift will cause you to think like an owner.
Don't just count on capital appreciation. Focus on income & dividend potential first and capital appreciation as a bonus.
This shift will cause you to think like an owner.
Like this thread? Follow me @BrianFeroldi.
I teach investors how to analyze businesses.
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