Warren Buffett

  • 06 Oct
    Analysts Love This Metric. Here’s Why You Shouldn’t.

    Analysts Love This Metric. Here’s Why You Shouldn’t.

    • EV/EBITDA is a widely used metric these days, so every investor should understand what it is.
    • We’ll discuss how EV/EBITDA is calculated and how you can manipulate it.
    • There are some pros to using it, but also some cons.



    Introduction

    When I was just starting with investing, I remember that the beta coefficient was popping up everywhere, next to almost every stock price or price to earnings ratio.

    The beta coefficient has faded in the last two decades as it was clear that markets aren’t efficient and that there is no real usage of the metric. Now a new metric has emerged lately and is used by most analysts. More →

  • 03 Oct
    Good Debt Explained: Why You May Want To Take Out A Loan To Invest

    Good Debt Explained: Why You May Want To Take Out A Loan To Invest



    • Investing isn’t only about choosing the right stocks, it’s also about proper capital allocation.
    • Taking on leverage to invest can be smart but it can also be incredibly dumb.
    • From an historical perspective, it could be a very smart thing to be ready to refinance your home and invest in stocks.

    Introduction

    Buffett and Munger praise themselves for never taking out loans for Berkshire and one of the most famous Buffett quotes is:

    “If you’re smart you don’t need debt, if you are not smart, you better stay far from debt.”

    However, this is another half-truth that he tells the world. More →

  • 29 Sep
    These 40 Charlie Munger Quotes Tell You Everything You Need To Know About Investing

    These 40 Charlie Munger Quotes Tell You Everything You Need To Know About Investing

    • I like Munger much better than Buffet. Munger will insult you, but you’ll be a better person after the fact.
    • It’s funny how investing principles can be summarized and simplified in a few quotes. The problem is that nobody, or maybe just a few, will actually listen and apply them.
    • We don’t need more than what Berkshire has done in the past 50+ years as a confirmation of how important this is to our investing lives.

    Introduction

    Charlie Munger is Warren Buffett’s partner in crime, but he’s usually not nearly as exposed to all the media attention.

    The difference between the two is that Warren really wants you to like him, while Munger really doesn’t give a f*** about what you think of him. Therefore, if you want the truth and you want to learn as much as possible about investing beyond the classic things Buffett says, you should listen to Munger. More →

  • 28 Sep
    This Is How You Find Stocks With A Margin Of Safety

    This Is How You Find Stocks With A Margin Of Safety

    • It’s impossible to accurately determine the actual value of a stock, but there are some methods that allow you to come close.
    • What’s even better is when you can buy at a price much lower than your intrinsic value calculation.
    • Qualitative factors can also help in assessing the margin of safety.

    Introduction

    The best investments are those that carry no risk with unlimited upside.

    Given that the markets are inefficient, it’s possible to find such investments and in today’s article, I’m going to describe the best ways to figure out what the margin of safety is in an investment. More →

  • 13 Sep
    Why You Should Always Watch, But Not Always Listen To, Warren Buffett

    Why You Should Always Watch, But Not Always Listen To, Warren Buffett

    • There’s a difference between what Buffett says and what he does.
    • Perhaps he doesn’t do the dirty work, but he for sure has someone else do it for him.
    • I’ll discuss three famous quotes that can be seen from various perspectives.

    Introduction

    I often mention Warren Buffett and his valuable investing advice. However, not all that he says has to be blindly believed.

    In this article, I’m going to debunk some of his most famous statements by showing that he neither follows his own advice nor do some of his theories still hold in the current environment. More →

  • 05 Sep
    The Ratio To Watch For Double Digit Returns

    The Ratio To Watch For Double Digit Returns

    • In the long run, corporate performance is defined by economic activity.
    • The CAPE ratio is an excellent metric, but it has some limitations which we discuss.
    • According to this metric, stocks have been more expensive only once: during the peak week of the dot-com bubble.

    Introduction

    In the long run, there is no other way for stocks to go than to follow economic fundamentals.

    Economic activity is what defines corporate growth and earnings. In the short term, this can be skewed by euphoria that pushes stocks into overvalued territory or by pessimism that creates unbelievable bargains (just remember 2009).

    So how can you know when stocks are overvalued or undervalued? The most commonly used metric is the price to earnings ratio (P/E) ratio. However, the P/E ratio is very volatile and heavily under the influence of economic activity. More →

  • 25 Aug
    Why You Shouldn’t Hold Your Facebook Stock Forever

    Why You Shouldn’t Hold Your Facebook Stock Forever

    • Good long-term investments can only come from companies that possess durable competitive advantages.
    • I’ll mention 6 things to watch for when looking for a durable competitive advantaged.
    • Today’s tech companies don’t have large moats, but this doesn’t mean you shouldn’t invest in them.

    Introduction

    As you probably remember, 1999 was a great year for stocks and a relatively bad year for Warren Buffett and Berkshire Hathaway (NYSE: BRK.A, BRK.B).

    Warren couldn’t really compete with the hysteria surrounding dot-com stocks and his performance in 1999 was a mere 0.5% increase in book value while the S&P 500 was exploding. This was due to several of his investments lagging the market due to lower operating earnings. Nevertheless, Buffett mentioned in his 1999 letter to shareholders how he was still happy to hold onto those companies because over time, he believed his businesses would do better than the S&P 500. More →

  • 15 Aug
    Is It Possible To Find A Wonderful Business At a Fair Price In Today’s Environment?

    Is It Possible To Find A Wonderful Business At a Fair Price In Today’s Environment?

    • We’ll first define what a wonderful business should be and what a fair price would be in relation to general stock market risk.
    • We’ll look at price earnings differences among sectors and countries to find places to look for great investments.
    • A list of S&P 500 companies with low P/E ratios shows that it isn’t easy to find wonderful businesses at a fair price.

    Introduction

    Warren Buffett’s main advice to investors is to find a wonderful business at a fair price. Now with the S&P 500 price to earnings (P/E) ratio of 24.34, that implies an earnings yield of just 4.1% which makes me ask myself, is it possible to find a wonderful business at a fair price today?

    I’ll first describe what a wonderful business is, look at what would be a fair price for it, and then look to see if there are any such businesses around. More →

  • 20 Jul
    Sven’s List Of The Five Books Every Investor & Trader Should Read

    Sven’s List Of The Five Books Every Investor & Trader Should Read

    I love books on investing, and find them to be the best possible investment. For just a few bucks, you can get the synthesized knowledge of the most successful investors. On top of that, many also discuss their mistakes, which are an even more valuable source of learning.

    So with that, today I’ll the list the books on my list that I think every investor or trader should read alongside a short commentary. More →

  • 13 Jul
    This Is What Could Happen To Berkshire Hathaway After Buffett

    This Is What Could Happen To Berkshire Hathaway After Buffett

    • BRK’s companies aren’t reliant on Buffett when it comes to their performance.
    • Buffett leaving leads to two uncertainties, but the outcome of both are positive.
    • The power of BRK lies in the quality of its businesses and huge cash pile. At this point, even an idiot at the helm of BRK would do well.

    Introduction

    One of the biggest concerns surrounding Berkshire Hathaway (NYSE: BRK.A, BRK.B) is what will happen after Buffett and Munger.

    To keep our karma positive, I’ll write this article under the assumption that Buffett gets an offer from Bill Gates to be the project manager of Microsoft’s (NASDAQ: MSFT) new multi-billion virtual reality Bridge game project. I think something like this could make Buffett leave BRK as I wish him many more decades of health. More →

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