WB detests risk. WB buys shares of companies that sell necessities at low prices. Understanding what you are investing in reduces risk.
WB says keep your eyes on the field, not on the scoreboard. Focus on your game, not on the score.
Then there's the classic: "Be fearful when others are greedy and greedy when others are fearful."
Showing posts with label Warren Buffett. Show all posts
Showing posts with label Warren Buffett. Show all posts
Wednesday, June 11, 2014
Thursday, August 23, 2012
MasterMind Quotes - Alchemy - MBA
- Here are a few excellent quotes I have gathered or wrote in the last couple days:"Every time a law changes, the future changes." -- Robert T. Kiyosaki
Be sure to do forecasting and boundary spanning with your MasterMind."Alchemists turn trash into cash." -- Robert T. Kiyosaki"It has been helpful to me to have tens of thousands of students turned out of business schools taught that it didnt do any good to think." -- Warren BuffettHelp the members of your Master Mind as much as the Bonesmen help each other. No excuses.Never be talked out of having a watchdog. Be a watchdog for your Master Mind.The Bonesmen bring something to their table. Bring something to your MasterMind's table.
Saturday, September 17, 2011
How to Be a Billionaire -- Book Review
How to Be a Billionaire - Proven Strategies from the Titans of Wealth- Written by Martin S. Fridson
This book looks at the titans of wealth. It was published in 2000 so you won't see some of the new money from Google and Facebook in here but the principles are the same. Whenever you can leverage thoughts from such an elite group of people, it is worth it to take the time to study it.
Quick useless trivia stats to put in perspective how much a million, billion and trillion really are - If you were to count that amount of money and assume that you count $1 dollar every second then here is how it works out:
1. It would take you 12 days to count $1,000,000 dollars.
2. It would take you 32 years to count $1,000,000,000 dollars.
3. It would take you over 32,000 years to count $1,000,000,000,000 dollars.
Let's not even discuss the U.S. debt. I guess we should make all the politicians sit in the room and count until they hit it. It may be a more productive use of their time since they get so much done now!
Why is this important to me? This book may not be important to you for good reasons. It takes huge sacrifice to become a billionaire. These titans of wealth are the elite of money making humanity. This takes work. If you think of the best professional athletes then you will understand the dedication it really takes. Muhammad Ali started boxing at 10 years old and practiced his whole life. Boxing was his life's passion and it took that type of dedication to be the best. He did not just step in the ring one day and become the best. It took him years of self-sacrifice, dedication and sweat equity to get it done. The same is true for all the Billionaires profiled in this book. On the other hand, there is great knowledge to be used if your goals are big but maybe not that big. Let's say you want a more balanced life then you can still use these principles to make a ton of money and garner security and the good things that money can buy without pouring all of your time in the endeavor. The principles you will see in this book take OPM, OPE and OPT to the extremes. I have talked about these concepts in other summaries. It is interesting how you see the same principles pop up in profiling success.
This book is packed with 9 principles used by different people to become billionaires. You may or may not agree but the data is conclusive on their success. I will touch on all of them but dig into the top 3 in more detail
1. Take Monumental Risks- "Fortune assists the brave" - H.L Hunt and John Kluge bankrolled their fortunes at the poker table. These men learned more about deals and money gambling then they did in traditional university. John borrowed $5000 from the bank and only used $1000 of it and then sold the business for $500,000. When he told the bank, the comment was "that is some leverage" - He asked - What is leverage? Years later he was sorry he asked. He amassed his fortune in Radio and LBO's (Leveraged Buyouts)
2. Do business in a new way - Sam Walton and Ross Perot both saw weaknesses in the market that they exploited. They built a culture of execution and market dominance. Wal-Mart may be the first company in history to generate $1 Trillion in revenue. This will summarize everything - According to Ross Perot - "The first EDSER to see a snake kills it. At GM, first thing you do is organize a committee on snakes. Then you bring in a consultant who knows a lot about snakes......Then you talk about if for one year." This is why Perot left GM after selling EDS to them.
3. Dominate your market - John D. Rockefeller and Bill Gates. Both were highly successful and dominated everything they touched. Both men created enemies and people ALWAYS questioned their tactics. With that aside you can't deny what they accomplished. They played to win. The story of Microsoft is one of shear dominance in the market. Gates exploited a whole and created an entire industry out of thin air. People questioned that Monopoly power that Microsoft had and they would be correct in pointing it out. This should be a goal of any entrepreneur - CONTROL YOUR MARKET. If you cannot be in the top 3 in your market then you need to get out of it. Gates lead Microsoft with razor sharp focus and expected the best. He leveraged his strength to branch into other profitable software markets. He read the encyclopedia cover to cover by age 11. You cannot deny his intellect.
4. Consolidate a market - This strategy does create billions of dollars but you need to be careful because most market rollups end in disaster. Read Billion Dollar Lessons. When you do it right like Wayne Huizenga of Waste Management then you create Billion dollar companies and market capitalizations. The key here is if you have two average companies and meld them together then you have one big average. This is not the way to do it. You have to execute and drive a culture of innovation to succeed with this method.
5. Buy Low - Warren Buffett, Carl Icahn, Lawrence Tisch and J. Paul Getty all used this strategy to amass fortune. Warren Buffet always wants to buy $1 and pay 50 cents. This is one secret to his magical fortune. When you dig in you will see he uses the right instruments to do this. He uses Insurance companies to buy whole or controlling interests in companies. This is brilliant because he can use the "Float" or OPM, the tax advantages of the entity and sound financial leverage. How can the little guy use these principles? I recommend checking out my summaries of Robert Kiyosaki's books. He talks about the same concepts but more in tune for the little guys.
6. Thrive on Deals - This is simply love of the game. You see this all the time when you study these billionaire magnets. The key is execution and the ones that are successful do not do deals for the deals sake. This is for all the other idiots that you can read about in the book summary Billion Dollar Lessons.
7. Out manage the competition - First and foremost, hire the right people. Be diligent at doing this. Microsoft used to take out ads that said - "We recruit the best and brightest only." They would give them difficult problems in the interview and tell them "Solve it". They ripped them to pieces before they hired them. This set the tone for the people that did get hired and they made no mistake about the culture. Sam Walton and Richard Branson also use positive reinforcement and entrusting people with a lot responsibility to out manage the competition.
These last two I will not spend any time on because for the other 95% of us we cannot do this and it clouds the game regardless.
How to be a billionaire is a simple road map to how the titans of business use certain strategies to amass fortunes. There is nothing better than investing a couple of hours and sucking out the knowledge of 300 man years of billionaire knowledge. This is, in my humble opinion, the best way to use leverage. That is OPE - leverage other people's expertise and use it for your own gain and to better society.
I hope you have found this short video summary useful. The key to any new idea is to work it into your daily routine until it becomes habit. Habits form in as little as 21 days.
One thing you can take away from this book is to buy low. This is probably the easiest thing to do. Invest the same way you buy groceries and good things will happen. One really good deal can have big effects.
I was really lucky in my business; we merged with a company that was going to be dissolved by a much bigger entity. We picked up the company for pennies and added to our team 3 professionals that will enhance us 10 fold. Be patient and keep your eyes open. "Luck favors the prepared mind."
Joe Mosed invites you to subscribe to http://www.successprogress.com to receive free video book summaries. Our vision at Success Progress is to provide relevant & meaningful content to our user community. To view the video summary of this article please visit http://www.successprogress.com/videos/billionaire
(c) Copyright - Joe Mosed / Success Progress All Rights Reserved Worldwide.
Article Source: http://EzineArticles.com/?expert=Joe_Mosed Article Source: http://EzineArticles.com/6413788
This book looks at the titans of wealth. It was published in 2000 so you won't see some of the new money from Google and Facebook in here but the principles are the same. Whenever you can leverage thoughts from such an elite group of people, it is worth it to take the time to study it.
Quick useless trivia stats to put in perspective how much a million, billion and trillion really are - If you were to count that amount of money and assume that you count $1 dollar every second then here is how it works out:
1. It would take you 12 days to count $1,000,000 dollars.
2. It would take you 32 years to count $1,000,000,000 dollars.
3. It would take you over 32,000 years to count $1,000,000,000,000 dollars.
Let's not even discuss the U.S. debt. I guess we should make all the politicians sit in the room and count until they hit it. It may be a more productive use of their time since they get so much done now!
Why is this important to me? This book may not be important to you for good reasons. It takes huge sacrifice to become a billionaire. These titans of wealth are the elite of money making humanity. This takes work. If you think of the best professional athletes then you will understand the dedication it really takes. Muhammad Ali started boxing at 10 years old and practiced his whole life. Boxing was his life's passion and it took that type of dedication to be the best. He did not just step in the ring one day and become the best. It took him years of self-sacrifice, dedication and sweat equity to get it done. The same is true for all the Billionaires profiled in this book. On the other hand, there is great knowledge to be used if your goals are big but maybe not that big. Let's say you want a more balanced life then you can still use these principles to make a ton of money and garner security and the good things that money can buy without pouring all of your time in the endeavor. The principles you will see in this book take OPM, OPE and OPT to the extremes. I have talked about these concepts in other summaries. It is interesting how you see the same principles pop up in profiling success.
This book is packed with 9 principles used by different people to become billionaires. You may or may not agree but the data is conclusive on their success. I will touch on all of them but dig into the top 3 in more detail
1. Take Monumental Risks- "Fortune assists the brave" - H.L Hunt and John Kluge bankrolled their fortunes at the poker table. These men learned more about deals and money gambling then they did in traditional university. John borrowed $5000 from the bank and only used $1000 of it and then sold the business for $500,000. When he told the bank, the comment was "that is some leverage" - He asked - What is leverage? Years later he was sorry he asked. He amassed his fortune in Radio and LBO's (Leveraged Buyouts)
2. Do business in a new way - Sam Walton and Ross Perot both saw weaknesses in the market that they exploited. They built a culture of execution and market dominance. Wal-Mart may be the first company in history to generate $1 Trillion in revenue. This will summarize everything - According to Ross Perot - "The first EDSER to see a snake kills it. At GM, first thing you do is organize a committee on snakes. Then you bring in a consultant who knows a lot about snakes......Then you talk about if for one year." This is why Perot left GM after selling EDS to them.
3. Dominate your market - John D. Rockefeller and Bill Gates. Both were highly successful and dominated everything they touched. Both men created enemies and people ALWAYS questioned their tactics. With that aside you can't deny what they accomplished. They played to win. The story of Microsoft is one of shear dominance in the market. Gates exploited a whole and created an entire industry out of thin air. People questioned that Monopoly power that Microsoft had and they would be correct in pointing it out. This should be a goal of any entrepreneur - CONTROL YOUR MARKET. If you cannot be in the top 3 in your market then you need to get out of it. Gates lead Microsoft with razor sharp focus and expected the best. He leveraged his strength to branch into other profitable software markets. He read the encyclopedia cover to cover by age 11. You cannot deny his intellect.
4. Consolidate a market - This strategy does create billions of dollars but you need to be careful because most market rollups end in disaster. Read Billion Dollar Lessons. When you do it right like Wayne Huizenga of Waste Management then you create Billion dollar companies and market capitalizations. The key here is if you have two average companies and meld them together then you have one big average. This is not the way to do it. You have to execute and drive a culture of innovation to succeed with this method.
5. Buy Low - Warren Buffett, Carl Icahn, Lawrence Tisch and J. Paul Getty all used this strategy to amass fortune. Warren Buffet always wants to buy $1 and pay 50 cents. This is one secret to his magical fortune. When you dig in you will see he uses the right instruments to do this. He uses Insurance companies to buy whole or controlling interests in companies. This is brilliant because he can use the "Float" or OPM, the tax advantages of the entity and sound financial leverage. How can the little guy use these principles? I recommend checking out my summaries of Robert Kiyosaki's books. He talks about the same concepts but more in tune for the little guys.
6. Thrive on Deals - This is simply love of the game. You see this all the time when you study these billionaire magnets. The key is execution and the ones that are successful do not do deals for the deals sake. This is for all the other idiots that you can read about in the book summary Billion Dollar Lessons.
7. Out manage the competition - First and foremost, hire the right people. Be diligent at doing this. Microsoft used to take out ads that said - "We recruit the best and brightest only." They would give them difficult problems in the interview and tell them "Solve it". They ripped them to pieces before they hired them. This set the tone for the people that did get hired and they made no mistake about the culture. Sam Walton and Richard Branson also use positive reinforcement and entrusting people with a lot responsibility to out manage the competition.
These last two I will not spend any time on because for the other 95% of us we cannot do this and it clouds the game regardless.
How to be a billionaire is a simple road map to how the titans of business use certain strategies to amass fortunes. There is nothing better than investing a couple of hours and sucking out the knowledge of 300 man years of billionaire knowledge. This is, in my humble opinion, the best way to use leverage. That is OPE - leverage other people's expertise and use it for your own gain and to better society.
I hope you have found this short video summary useful. The key to any new idea is to work it into your daily routine until it becomes habit. Habits form in as little as 21 days.
One thing you can take away from this book is to buy low. This is probably the easiest thing to do. Invest the same way you buy groceries and good things will happen. One really good deal can have big effects.
I was really lucky in my business; we merged with a company that was going to be dissolved by a much bigger entity. We picked up the company for pennies and added to our team 3 professionals that will enhance us 10 fold. Be patient and keep your eyes open. "Luck favors the prepared mind."
Joe Mosed invites you to subscribe to http://www.successprogress.com to receive free video book summaries. Our vision at Success Progress is to provide relevant & meaningful content to our user community. To view the video summary of this article please visit http://www.successprogress.com/videos/billionaire
(c) Copyright - Joe Mosed / Success Progress All Rights Reserved Worldwide.
Article Source: http://EzineArticles.com/?expert=Joe_Mosed Article Source: http://EzineArticles.com/6413788
Thursday, April 7, 2011
Quotable Warren Buffett
"It's better to hang out with people better than you. Pick out associates whose behavior is better than yours, and you'll drift in that direction."
-- Warren Buffett
-- Warren Buffett
Wednesday, April 21, 2010
The On Sure Wealth Creating Strategy
Like many young people, I started my career planning to become the CEO of a very large company and make a lot of money. There are many people who climb the corporate ladder to significant success. However, as you climb that ladder you begin to realize there is significant and increasing risk to those positions as the course of business events including changing bosses, changing economic conditions, and other business impacting events can bring your plans to screeching halt. Unless you have the right global personal financial and wealth building plan in place behind such a plan your best goals can run into brick walls. Let's get to the plan.
First, what is a plan?
A plan is:
A series of steps that if followed should lead to the result we intend to reach.
A plan should not allow for activities that create additional risk and undermine the goals intended.
A well designed planned will have self prophesizing activities included that are synergistic to the main objectives of the plan.
I am a student of history. Study of the most successful business persons in our nation's history all reflect these facts. Benjamin Franklin, George Washington, John D. Rockefeller, The Morgans, Warren Buffet and Bill Gates all demonstrated the following key attributes:
They selected their business focus and steadfastly kept to that focus.
They invested and reinvested their time and assets into these items.
They avoided debt and built equity.
They lived within their means (not always but from the point their success began to grow)
One of my favorite subjects on this single minded focused plan is Warren Buffet. His biography - Snowball does a tremendous job capturing the larger plan. So, what is the ONE secret to creating the personal wealth, security, and fulfillment that is your goal?
Choose a path, stick to the path, invest time and cautiously capital, stay within your means, strictly limit debt or hold no debt, and achieve steady consistent gains. This should apply to your jobs, your outside activities, and your investments. Warren Buffet says a diversified portfolio is a sign of ignorance of your investment area. Avoid ignorance and as Rich Dad Poor Dad suggests increase your financial IQ and knowledge in your focus area.
Consider that if you could save $500 per month for 25 years with no appreciation you would accumulate $150,000. Now consider that even if you only make 6% annually on those investments you will accumulate several hundred thousand dollars. Additionally, in the same time frame you will likely purchase and pay off your home. Considering that the markets normally average an inflation adjusted 8.5%.
The point this is, that while this plan doesn't promise millions the plan offers almost no downside risk, assures a very positive upside result. Once this is in place, over the course of a career or even if you are having to make a fresh start in your 40s or even 50s, a very significant financial success is within your reach and with work you will eventually improve your results over the base plan. One step at a time, one action at a time, create wealth, secure your future, and build a foundation for the future.
Blake Ratcliff has raised millions in equity capital, bought and operated 10s of millions of assets. He is a former Marine Officer, a United States Naval Academy Graduate, a father of 4, an avid reader, and starting all over again. Let's walk the journey together.
http://thejourneytogreatliving.wordpress.com/
Article Source: http://EzineArticles.com/?expert=Blake_Dale_Ratcliff
First, what is a plan?
A plan is:
A series of steps that if followed should lead to the result we intend to reach.
A plan should not allow for activities that create additional risk and undermine the goals intended.
A well designed planned will have self prophesizing activities included that are synergistic to the main objectives of the plan.
I am a student of history. Study of the most successful business persons in our nation's history all reflect these facts. Benjamin Franklin, George Washington, John D. Rockefeller, The Morgans, Warren Buffet and Bill Gates all demonstrated the following key attributes:
They selected their business focus and steadfastly kept to that focus.
They invested and reinvested their time and assets into these items.
They avoided debt and built equity.
They lived within their means (not always but from the point their success began to grow)
One of my favorite subjects on this single minded focused plan is Warren Buffet. His biography - Snowball does a tremendous job capturing the larger plan. So, what is the ONE secret to creating the personal wealth, security, and fulfillment that is your goal?
Choose a path, stick to the path, invest time and cautiously capital, stay within your means, strictly limit debt or hold no debt, and achieve steady consistent gains. This should apply to your jobs, your outside activities, and your investments. Warren Buffet says a diversified portfolio is a sign of ignorance of your investment area. Avoid ignorance and as Rich Dad Poor Dad suggests increase your financial IQ and knowledge in your focus area.
Consider that if you could save $500 per month for 25 years with no appreciation you would accumulate $150,000. Now consider that even if you only make 6% annually on those investments you will accumulate several hundred thousand dollars. Additionally, in the same time frame you will likely purchase and pay off your home. Considering that the markets normally average an inflation adjusted 8.5%.
The point this is, that while this plan doesn't promise millions the plan offers almost no downside risk, assures a very positive upside result. Once this is in place, over the course of a career or even if you are having to make a fresh start in your 40s or even 50s, a very significant financial success is within your reach and with work you will eventually improve your results over the base plan. One step at a time, one action at a time, create wealth, secure your future, and build a foundation for the future.
Blake Ratcliff has raised millions in equity capital, bought and operated 10s of millions of assets. He is a former Marine Officer, a United States Naval Academy Graduate, a father of 4, an avid reader, and starting all over again. Let's walk the journey together.
http://thejourneytogreatliving.wordpress.com/
Article Source: http://EzineArticles.com/?expert=Blake_Dale_Ratcliff
Saturday, January 30, 2010
Warren Buffett - 3 Surefire Ways to Get Rich in a Recession
As a student of business I am always keeping my eyes on the moves of what those who possess the success I desire are doing! What are they thinking about the current financial opportunities and what are they doing with their money and time!
I subscribe to the philosophy that your life mirrors those whom you spend the time most time studying and emulating!
That said during the onset of the recession Mr. Buffet did something unlike anything he has ever done in his entire business career! He actually thrust himself into the spotlight and began talking more than ever and giving out advice to every television reporter and newspaper journalist that would listen.
He took out a full page ad in the The Wall Street Journal urging the savvy business people of America to wake up and realize that during this recessionary climate was the opportune time to position yourself for long term wealth. He spoke of the immense financial fortunes built during and subsequently just after the Great Depression and he admonished people to not squander this grand opportunity to change the course of their families financial futures!
Unfortunately, most people totally missed the boat as he did interview after interview and went all over the country and world for that matter espousing the virtue of investing when there is "blood in the streets!" In his words, "you need to be buying when everyone is selling everything they have as cheap and as fast as possible!" He then specifically went on to give details into how anyone could amass a fortune quickly in the midst of the recession if they did this one thing!
What you ask? Mr. Buffet said in simple terms that if you would like to make a flat out fortune in the next 3-5 years then you need to position yourself in 1 of 3 recession proof industries that always thrive regardless of economic cycle. Those 3 industries are as follows:
Tobacco
Alcohol
Coffee
Now to most people it seems odd that one of the richest men in the world would say invest your time, money and efforts over the next few years into one of these (3) key recession proof industries! Well coming from Warren Buffet that sounds wisdom but let's validate it with some social proof just for good measure!
Think about the last time you saw cigarettes prices go down, if ever! Probably not, I am sure. In addition to that, they continue to raise the prices with cigarettes now being as high as $8 a package I think. As for alcohol, I think we all know how huge that industry is and I needn't really get into that very much. Lo and behold, our last industry which is coffee, just happens to be a $90 billion dollar industry that employs over 12 million people!
After hearing Mr. Buffet, I began an in-depth study that has proved to be my most profitable business investment yet with it continuing to pay huge dividends! You see coffee is the 2nd most traded commodity in the world only behind oil and as someone who lives in the oil industry mecca of Houston, Texas I am very familiar intimately and financially with how much money is in the oil business. So to think that I am now involved in the manufacture, distribution and sale of the 2nd most traded commodity in the world is simply an amazing thought!
Coffee is also a universally accepted and consumed product with it being the 2nd most consumer product in the world, led only by water! (It takes water to make coffee!) It was at this point I began to really understand the genius of Mr. Buffet and it also helped me easily identify why he is a billionaire!
With that I sprung into action and discovered a way to help over 40 people in the 12 months retire financially free and fire their bosses!
Take Action Now
Article Source: http://EzineArticles.com/?expert=Tyron_Mcdaniel
I subscribe to the philosophy that your life mirrors those whom you spend the time most time studying and emulating!
That said during the onset of the recession Mr. Buffet did something unlike anything he has ever done in his entire business career! He actually thrust himself into the spotlight and began talking more than ever and giving out advice to every television reporter and newspaper journalist that would listen.
He took out a full page ad in the The Wall Street Journal urging the savvy business people of America to wake up and realize that during this recessionary climate was the opportune time to position yourself for long term wealth. He spoke of the immense financial fortunes built during and subsequently just after the Great Depression and he admonished people to not squander this grand opportunity to change the course of their families financial futures!
Unfortunately, most people totally missed the boat as he did interview after interview and went all over the country and world for that matter espousing the virtue of investing when there is "blood in the streets!" In his words, "you need to be buying when everyone is selling everything they have as cheap and as fast as possible!" He then specifically went on to give details into how anyone could amass a fortune quickly in the midst of the recession if they did this one thing!
What you ask? Mr. Buffet said in simple terms that if you would like to make a flat out fortune in the next 3-5 years then you need to position yourself in 1 of 3 recession proof industries that always thrive regardless of economic cycle. Those 3 industries are as follows:
Tobacco
Alcohol
Coffee
Now to most people it seems odd that one of the richest men in the world would say invest your time, money and efforts over the next few years into one of these (3) key recession proof industries! Well coming from Warren Buffet that sounds wisdom but let's validate it with some social proof just for good measure!
Think about the last time you saw cigarettes prices go down, if ever! Probably not, I am sure. In addition to that, they continue to raise the prices with cigarettes now being as high as $8 a package I think. As for alcohol, I think we all know how huge that industry is and I needn't really get into that very much. Lo and behold, our last industry which is coffee, just happens to be a $90 billion dollar industry that employs over 12 million people!
After hearing Mr. Buffet, I began an in-depth study that has proved to be my most profitable business investment yet with it continuing to pay huge dividends! You see coffee is the 2nd most traded commodity in the world only behind oil and as someone who lives in the oil industry mecca of Houston, Texas I am very familiar intimately and financially with how much money is in the oil business. So to think that I am now involved in the manufacture, distribution and sale of the 2nd most traded commodity in the world is simply an amazing thought!
Coffee is also a universally accepted and consumed product with it being the 2nd most consumer product in the world, led only by water! (It takes water to make coffee!) It was at this point I began to really understand the genius of Mr. Buffet and it also helped me easily identify why he is a billionaire!
With that I sprung into action and discovered a way to help over 40 people in the 12 months retire financially free and fire their bosses!
Take Action Now
Article Source: http://EzineArticles.com/?expert=Tyron_Mcdaniel
Wednesday, September 30, 2009
8 Games of Wealth Creation
According to wealth dynamics, all of us are good at 8 different types of games that will lead us to wealth. Like soccer, it is a rule that each team only fields in 11 players minus the reserves. Like badminton, it is a rule that your shuttle must land at your opponent's territory and has to be over the net, in order to score. As with all games, they have their own rules. The simplest rule of attaining wealth is to actually play well in only 1 out of the 8 different wealth games. So which game are you actually good at, let's find out:
1. The Game of Creation
People like Bill Gates, Thomas Edison and Pablo Picasso attain their wealth through creations. Gates created the Microsoft Windows software; Edison invented the modern light bulb while Picasso painted his famous avant-garde cubism artworks. These people cannot resist creating new things and the blood of creativity flows deep in their veins. That is why the world always respects innovative breakthroughs.
2. The Game of Magnetism
Why that kid who is in your high school back then, seem to be so popular with the girls? Is it because of his looks? His talent or is it that wide cute grin of his that melts the hearts of the girls? Some people are just naturally more attractive in a number of ways. You may wonder why teen idols whose acting skills and talents are still fledging and yet they are able to swoon thousands and millions of fans. It is really because of the image, branding and perception. That is why when Michael Jackson is performing his signature moonwalk, the thousands in the audience screamed and cheered as if they just witness an act of miracle.
3. The Game of Nurture
Have you ever come across someone whom you can rely on personally to give you listening ear and attention you need. This person is so encouraging and supportive that you feel so relieved even when you have made a big mess? When Jack Welch first steps into General Electric (GE) as the CEO, GE was actually an ominous shadow that had many bureaucratic red-tapes. The company was doing well then but it had a very negative culture that stifles talents and the possibilities of milestones. That is why GE was able to nurture more than 100 CEOs that went on to lead Fortune 100 companies during Welch's tenure.
4. The Game of Dealing
There is a big difference between a counselor and dealer. Both are fantastic with people. However a counselor is better in bringing the best out of the person while the dealer is better in making the person buy the best deal. Donald Trump is known for being a hard nut to crack during his business deals. But he always brings the best deals out of nowhere. That is why when Trump was in deep in the red during the late 1980s, the banks are still willing to loan him capital to make more deals.
5. The Game of Trading
Do you have a very reliable broker? Does he always tell you to be on time? Does he usually refuse to gives you the answer that you want so badly? You probably pester him about when the market goes up so that you can buy or when the market goes down so you must sell. Does he always seem to say the right things that you can rely on? While banks and institutions are bleeding badly from a great loss of funds, George Soros single-handedly beat the market and made millions in a single calculated masterful stroke. That is why people always say time and tide waits for no man because the window of opportunity closes with time and the door to disaster may just open after the window is shut.
6. The Game of Patience
People who excel in this game tend to be people of great patience. And because of that they are the true-blue investors. Investment is about making a purchase on something that has growth potential. When we talk about growth, we need to reflect back on the growth of a sapling to a tree. Growth takes a tremendous amount of time. The Chinese has this saying that 'Real gold will not be melted by the flames of the furnace.' That is why when everybody is rushing off to sell all their stocks and investments, Warren Buffet will be one of those few brave souls who will not sell anything and instead start on a shopping spree.
7. The Game of Monopoly
Some people just have this cold gaze. They also tend to prefer to talk in detached terms, preferring data and numbers to people. The game of multiplication is really about flirting with mathematics. Accountants, auditors and administrators always have a great eye for detail. And it is because of people like them, they can reverse the company financial fortunes, not by illegally adding a few more zeros, but tweaking in such a way that the savings of costs can free up a few more zeros. That is why John Rockefeller is able to play the monopoly game in the oil industry simply by controlling the supply of oil.
8. The Game of Duplication
This is perhaps one of the most perplexing game to play since it is the toughest but also the most rewarding game of wealth. This is a game whereby upgrading and improvements are vital. Like the game of monopoly, it involves precise data manipulation. However the data is being manipulate for improvements rather than weeding out the negatives. Improvements have to be in sync rather than stand-alone. It is like constructing a building; every angle has to be optimized if not the building faces the risk of structural collapse. That is why Ray Kroc spent more than 50 years of his life underachieving, before fine-tuning the concept of MacDonalds to almost flawless perfection that went on to be one of the most successful F&B outlet chain in the world.
Each of these 8 games of wealth is able to provide you with utter riches and abundance in your life. What is the game you are good at?
Know your enemy and know yourself, find naught in fear for 100 battles. -Sun Tzu
Dias Lu is an entrepreneur who specialises in self-empowerment, wealth mastery, and entrepreneurial leadership. Currently he is running his internet marketing business and doing part-time experiential coaching.
To continue to benefit from his shared experience, visit his blog at http://www.diaslu.com
While not actively pursuing his dreams, he will be practicing his martial arts, reading and writing articles. He believes that everyone has a right to their dreams and that perseverance and helping one another will achieve exactly those dreams.
He continues to blogs and shares his ideas at http://www.diaslu.com
Article Source: http://EzineArticles.com/?expert=Dias_Lu
1. The Game of Creation
People like Bill Gates, Thomas Edison and Pablo Picasso attain their wealth through creations. Gates created the Microsoft Windows software; Edison invented the modern light bulb while Picasso painted his famous avant-garde cubism artworks. These people cannot resist creating new things and the blood of creativity flows deep in their veins. That is why the world always respects innovative breakthroughs.
2. The Game of Magnetism
Why that kid who is in your high school back then, seem to be so popular with the girls? Is it because of his looks? His talent or is it that wide cute grin of his that melts the hearts of the girls? Some people are just naturally more attractive in a number of ways. You may wonder why teen idols whose acting skills and talents are still fledging and yet they are able to swoon thousands and millions of fans. It is really because of the image, branding and perception. That is why when Michael Jackson is performing his signature moonwalk, the thousands in the audience screamed and cheered as if they just witness an act of miracle.
3. The Game of Nurture
Have you ever come across someone whom you can rely on personally to give you listening ear and attention you need. This person is so encouraging and supportive that you feel so relieved even when you have made a big mess? When Jack Welch first steps into General Electric (GE) as the CEO, GE was actually an ominous shadow that had many bureaucratic red-tapes. The company was doing well then but it had a very negative culture that stifles talents and the possibilities of milestones. That is why GE was able to nurture more than 100 CEOs that went on to lead Fortune 100 companies during Welch's tenure.
4. The Game of Dealing
There is a big difference between a counselor and dealer. Both are fantastic with people. However a counselor is better in bringing the best out of the person while the dealer is better in making the person buy the best deal. Donald Trump is known for being a hard nut to crack during his business deals. But he always brings the best deals out of nowhere. That is why when Trump was in deep in the red during the late 1980s, the banks are still willing to loan him capital to make more deals.
5. The Game of Trading
Do you have a very reliable broker? Does he always tell you to be on time? Does he usually refuse to gives you the answer that you want so badly? You probably pester him about when the market goes up so that you can buy or when the market goes down so you must sell. Does he always seem to say the right things that you can rely on? While banks and institutions are bleeding badly from a great loss of funds, George Soros single-handedly beat the market and made millions in a single calculated masterful stroke. That is why people always say time and tide waits for no man because the window of opportunity closes with time and the door to disaster may just open after the window is shut.
6. The Game of Patience
People who excel in this game tend to be people of great patience. And because of that they are the true-blue investors. Investment is about making a purchase on something that has growth potential. When we talk about growth, we need to reflect back on the growth of a sapling to a tree. Growth takes a tremendous amount of time. The Chinese has this saying that 'Real gold will not be melted by the flames of the furnace.' That is why when everybody is rushing off to sell all their stocks and investments, Warren Buffet will be one of those few brave souls who will not sell anything and instead start on a shopping spree.
7. The Game of Monopoly
Some people just have this cold gaze. They also tend to prefer to talk in detached terms, preferring data and numbers to people. The game of multiplication is really about flirting with mathematics. Accountants, auditors and administrators always have a great eye for detail. And it is because of people like them, they can reverse the company financial fortunes, not by illegally adding a few more zeros, but tweaking in such a way that the savings of costs can free up a few more zeros. That is why John Rockefeller is able to play the monopoly game in the oil industry simply by controlling the supply of oil.
8. The Game of Duplication
This is perhaps one of the most perplexing game to play since it is the toughest but also the most rewarding game of wealth. This is a game whereby upgrading and improvements are vital. Like the game of monopoly, it involves precise data manipulation. However the data is being manipulate for improvements rather than weeding out the negatives. Improvements have to be in sync rather than stand-alone. It is like constructing a building; every angle has to be optimized if not the building faces the risk of structural collapse. That is why Ray Kroc spent more than 50 years of his life underachieving, before fine-tuning the concept of MacDonalds to almost flawless perfection that went on to be one of the most successful F&B outlet chain in the world.
Each of these 8 games of wealth is able to provide you with utter riches and abundance in your life. What is the game you are good at?
Know your enemy and know yourself, find naught in fear for 100 battles. -Sun Tzu
Dias Lu is an entrepreneur who specialises in self-empowerment, wealth mastery, and entrepreneurial leadership. Currently he is running his internet marketing business and doing part-time experiential coaching.
To continue to benefit from his shared experience, visit his blog at http://www.diaslu.com
While not actively pursuing his dreams, he will be practicing his martial arts, reading and writing articles. He believes that everyone has a right to their dreams and that perseverance and helping one another will achieve exactly those dreams.
He continues to blogs and shares his ideas at http://www.diaslu.com
Article Source: http://EzineArticles.com/?expert=Dias_Lu
Thursday, February 5, 2009
Seven Different Investing Strategies
There are over 5000 publicly traded companies. But how do you figure out which ones to trade or invest in? I will show you several good investment ideas (plays) to consider.
You can buy shares of a company that is reportedly going to buy back its own shares. This is simply called a buyback. Buybacks are good because the company buying back its shares shows the confidence of its board in the future of the company. Investing in companies that buy back their shares usually prove to be superior investments.
You can find a company that is a good candidate for takeover by another company. Frequently, the share price of the company being acquired will rise, while the acquiring company's shares will usually decline.
You could also invest in a small cap or micro cap company that you believe could increase in value. The reasons to be optimistic about a small company's future could be a rumor the company is about to become profitable or to receive a contract. There could be significant insider buying, which is frequently a good sign. You could also choose to invest in a company because of increasing earnings.
Another strategy you could try is a dividend play. An above average dividend yield is a sign that a company is in good financial shape. Dividends can be cut, however. You could buy shares of a company that's dividend has increased over the years. If such an investment pans out, you could profit from both growth and income.
Selling short could be an option for you too. If you know of bad news looming for a company, selling short may be the thing to do. Watch for signs that a stock is way overpriced, like a high P/E ratio.
Look at changing demographics for investment ideas. For example, look at the aging of the U.S. What will the Baby Boomers likely spend money on in the next ten to thirty years? This should give you several ideas, including: healthcare, retirement centers, entertainment, leisure, and travel. You will have to hold on to these types of shares for some time to really profit.
Last, I will talk about value plays. If you see the shares of a company that you like is really getting battered, but you believe that things will turn around for the company eventually, consider buying shares. This sounds easy, but investors, and the family and friends of investors frequently see such an investment as suicide. But this is how Warren Buffett of Berkshire Hathaway has invested throughout his career. Buffett buys quality companies while other investors are fearful.
In conclusion, try to use what you know about the economy, and the companies you know about to earn profits in your investments. If you need more help, hire a well referenced stock broker, and start reading the classic investment books.
David K Drews runs http://www.independentwealth.us , a site you want to visit if you want out of the rat race. The investment books I recommend are listed inside.
You can buy shares of a company that is reportedly going to buy back its own shares. This is simply called a buyback. Buybacks are good because the company buying back its shares shows the confidence of its board in the future of the company. Investing in companies that buy back their shares usually prove to be superior investments.
You can find a company that is a good candidate for takeover by another company. Frequently, the share price of the company being acquired will rise, while the acquiring company's shares will usually decline.
You could also invest in a small cap or micro cap company that you believe could increase in value. The reasons to be optimistic about a small company's future could be a rumor the company is about to become profitable or to receive a contract. There could be significant insider buying, which is frequently a good sign. You could also choose to invest in a company because of increasing earnings.
Another strategy you could try is a dividend play. An above average dividend yield is a sign that a company is in good financial shape. Dividends can be cut, however. You could buy shares of a company that's dividend has increased over the years. If such an investment pans out, you could profit from both growth and income.
Selling short could be an option for you too. If you know of bad news looming for a company, selling short may be the thing to do. Watch for signs that a stock is way overpriced, like a high P/E ratio.
Look at changing demographics for investment ideas. For example, look at the aging of the U.S. What will the Baby Boomers likely spend money on in the next ten to thirty years? This should give you several ideas, including: healthcare, retirement centers, entertainment, leisure, and travel. You will have to hold on to these types of shares for some time to really profit.
Last, I will talk about value plays. If you see the shares of a company that you like is really getting battered, but you believe that things will turn around for the company eventually, consider buying shares. This sounds easy, but investors, and the family and friends of investors frequently see such an investment as suicide. But this is how Warren Buffett of Berkshire Hathaway has invested throughout his career. Buffett buys quality companies while other investors are fearful.
In conclusion, try to use what you know about the economy, and the companies you know about to earn profits in your investments. If you need more help, hire a well referenced stock broker, and start reading the classic investment books.
David K Drews runs http://www.independentwealth.us , a site you want to visit if you want out of the rat race. The investment books I recommend are listed inside.
Tuesday, January 20, 2009
The Key to Investing in a Recession is Asset Allocation
You have likely seen articles in major financial publications and web sites about choosing an asset allocation. You allocate your funds between stocks, real estate stocks (REIT's), bonds, and other assets, including ETF's that sell short and commodities.
Most people just need to move a portion of their funds to a short selling ETF.
Most well allocated portfolios should survive recession. It is a bad idea to go 100% in cash. It is a bad idea to go 100% in any one asset class.
Also, be sure to pick up bargains at a discount. That is one way that Warren Buffett has earned so much money over the years.
Buy low and sell high, remember?
Speaking of lows and Warren Buffett, BRK-B is trading for below $3000 now. I would take a look.
Most people just need to move a portion of their funds to a short selling ETF.
Most well allocated portfolios should survive recession. It is a bad idea to go 100% in cash. It is a bad idea to go 100% in any one asset class.
Also, be sure to pick up bargains at a discount. That is one way that Warren Buffett has earned so much money over the years.
Buy low and sell high, remember?
Speaking of lows and Warren Buffett, BRK-B is trading for below $3000 now. I would take a look.
Become a Billionaire
You've heard the saying, "buy on the rumor, sell on the news". Thats a huge part of investing, esp daytrading. You can also use what you know to help you profit off stocks. If you got a new "item" and you figured the item would be HOT, you'd buy some shares.
In 1993, I bought zero coupons right before Clinton's inauguration. I KNEW he would raise taxes. I figured investors would flee to bonds for safety. I figured interest rates would go down. As it turned out, I made over 40% in less than a year. Man did people b*itch about my prediction.
People with a nanny state or a poverty consciousness went berserk on me at the freedom loving Portland State University. If you are easily swayed by what some dunce says, keep your picks quiet.
Anyway, if you can keep making good picks and reinvesting your profits and adding HUGE amounts of cash to your holdings, you could be a billionaire one day. Yes, there is huge risk. Do not go borrow money to invest. If you can't afford to take the risk, don't do it.
Like I say all the time, keep yourself and your mastermind away from negative influences. This is very important.
Where do I get stock picks? Good newsletters, CNBC, financial magazines, message boards. I have watched some stocks since the late 1980's. You can look in the top 10 holding of excellent mutual funds and etfs. You could invest in the companies that sell stuff you really like ( and hopefully everyone else ). Look at the Buy Back Letter. They are pretty good. ( No guarantees tho).
Again, take a look as disruptive tech, and small caps.
Remember, Buffett says all the time: buy when others are fearful! I have bought a few shares in this recession so far. I believe smart investors are doing that too.
Are you overwhelmed ? Get a good broker and stat reading excellent investment books. Take classes too.
In 1993, I bought zero coupons right before Clinton's inauguration. I KNEW he would raise taxes. I figured investors would flee to bonds for safety. I figured interest rates would go down. As it turned out, I made over 40% in less than a year. Man did people b*itch about my prediction.
People with a nanny state or a poverty consciousness went berserk on me at the freedom loving Portland State University. If you are easily swayed by what some dunce says, keep your picks quiet.
Anyway, if you can keep making good picks and reinvesting your profits and adding HUGE amounts of cash to your holdings, you could be a billionaire one day. Yes, there is huge risk. Do not go borrow money to invest. If you can't afford to take the risk, don't do it.
Like I say all the time, keep yourself and your mastermind away from negative influences. This is very important.
Where do I get stock picks? Good newsletters, CNBC, financial magazines, message boards. I have watched some stocks since the late 1980's. You can look in the top 10 holding of excellent mutual funds and etfs. You could invest in the companies that sell stuff you really like ( and hopefully everyone else ). Look at the Buy Back Letter. They are pretty good. ( No guarantees tho).
Again, take a look as disruptive tech, and small caps.
Remember, Buffett says all the time: buy when others are fearful! I have bought a few shares in this recession so far. I believe smart investors are doing that too.
Are you overwhelmed ? Get a good broker and stat reading excellent investment books. Take classes too.
Tuesday, November 11, 2008
Buy a Toll Bridge
BYLANES - Buffet's Toll Bridge
Imagine a river with a commercial district on one side and residential on the other. Now, imagine a bridge spanning the river, joining the two districts. And imagine that you own the bridge, and can charge a small fee for using the bridge. A few thousand cars pass over the bridge every day, and you charge each car a little something for using the bridge. I bet you have already started counting the money. Warren Buffet keeps this perspective in mind while choosing a stock.
Some basic advantages of such a `toll bridge` should be understood. One is that the cash register keeps ticking without a stop. The other advantage is that there are no sundry debtors. Further, the maintenance and expenditure is low and the profits can grow at a predictable rate, and that too for a number of years. If you (that is. the owner) do not become irrationally greedy and maintain the fees for crossing at a reasonable level, the customers will continue to use your bridge, and you will make money for a number of years to come.
Many businesses reach the status of a toll bridge because of the strong relationships their products build with the customers. The first sign of such a company is apparent when the customers demand the product by its brand name and don`t even know the name of the company that produces it. The second sign is that it has little, or no competition, and the third sign is that it is essential either as a necessity, or for its universal appeal, and, therefore, every store has to carry it.
Let us consider some examples in the Indian context. `Cadbury`s` chocolate, `Cherry Blossom` shoe polish (how many know the name of the company? (Viz. Reckitt & Coleman), `Dettol` disinfectant, `Aspro` and `Anacyn`--the headache cures--and `Amul` butter easily come to mind. In pharmaceuticals, Glaxo is one such name, which has many products in demand. Can any store afford not to have these products on their shelves? If the store does not have it, the customer just walks over to the next store and gets it.
Companies making such products are in a unique position. They have established the manufacturing process, people have accepted the quality and specifications, they do not have to invest large sums in the plant and machinery every year, and their supply chains and distribution network are well established. The net result is steadily growing profits. These companies have some more advantages. They do not need exceptional management, just an honest management capable of grabbing a good thing when they see it and not to make a mess of it. These companies do not require too much of research and development (R&D), as they invented the formula many years ago and their customers don`t want any change. Would you like Dettol to smell differently? A good friend of mine even used it as an after-shave for many years. The management may add a gift with the purchase of a bottle, or add a new flavor to the product range to grab a little extra of the market share, but a wise management will leave the main product untouched. In Dettol`s case, even the shape of the bottle is important.
Such structurally sound and `in-demand` toll bridges are great businesses to own. They give rise to plenty of free cash, which can be invested in building or buying another such toll bridge. These businesses survive through economic downturns, and continue to give the same returns. This feature makes it easier to predict their profitability. Value investors love this.
The return for the investor is on the one side the earnings per share (EPS) (or dividend) and on the other increase in the share price. If the annual EPS/dividend is predictable, and if the share is purchased at a low enough price, the investor is happy to get such a return year after year. Many times, we see such companies showing an increasing EPS trend. This is still better for the investor, because this increases the price of the share faster.
Much has been said and written about the intrinsic value of the business and how it is to be arrived at, but with insufficient justice to the discipline involved. Value investors eye the company first, but their decision to buy is a function of the price. Everything else about the company may be perfect and the value investor may be itching to own a part of it, but a disciplined investor will wait for the right price. Once purchased, the stock is not sold for a long time. The argument is simple. Why give away something `good` till something `better` comes along? Remember that a good toll bridge has a minimum life of 25 years. If the EPS is in the region of 20% and above on the price you paid, calculate the compounded value at the end of those 25 years and see for yourself. Yet there is a sad side. Like everything else in this world, bridges also deteriorate. Weather and time take a heavy toll of steel, and the bridge becomes unsafe. Those car owners who drove to work over that bridge for a number of years realise that the bridge is no longer safe and avoid using it. Some competitor senses the unease and builds a new bridge, and the owner of the original bridge dies an unsung death.
We know what happened to some automobile companies from the pre- liberalisation days. From the mid-50s to the mid-80s, Premier Padmini and Hindustan Motor`s Ambassador were the two cars ruling the market. For years, they continued to thrive without making any major changes in the models, and Indians had no choice but to buy those cars. Whatever was produced was sold, and that too against cash. Sub-standard goods were produced for years and dumped on the helpless customers. With little R&D and no improvement in the basic car, these plants were just waiting to receive a deathblow, and `Maruti` did just that. Customers had found another safer, newer, and cheaper bridge.
Sometimes, some management decisions cause problems. Excess cash poses a problem. The management does not know what to do with it, and then instead of buying another toll bridge, or improving the existing one, it buys a pyramid, which is just a tourist attraction and a place for the dead. The pyramid bleeds the parent company, and finally both perish. Acquisitions and mergers are good, but only of the same kind. In the recent past, we have seen the merger of Times Bank with HDFC Bank. Synergy in operation was evident, and the balance sheet proved it. The market also appreciated it, and the shareholders have reaped the benefit.
It is easy to say that one should invest in such `consumer monopolies`, as Warren Buffett calls them, but it is another thing to actually buy these shares. No one has monopoly over such a wisdom, and generally we find these shares selling at a high P/E multiple. Yet, occasionally, these shares sell at low prices. John Neff`s advice is worth following while waiting for a good price. He advices the investors to regularly scan the `New Lows` list in the financial newspapers. If you have earmarked a share, then this list alerts you when it starts coming down. Consider this example, In March 2000, Glaxo hit a new low of Rs 422. In August, it is trading at 480/490. Reckitt & Coleman hit a new low of Rs 192 in March. Now it is trading around 210/220. If someone had earmarked the share, then surely it was a good time to buy.
Sometimes, a `consumer monopoly` company remains unnoticed for a long time. These are the companies engaged in manufacturing some product, without which the big guns cannot do. An example could be that of a company manufacturing some critical chemical required for steel making. This company may also own the patent for the product and, thus, the monopoly remains assured for a long time. Such companies spend very little on advertising and, hence, are not widely known. Some event of social or political nature makes it conspicuous, and suddenly the great value of the share gets unlocked, and the price starts climbing. Mario Gabelli, a well-known investor from the US calls the event a `catalyst`. Noticing such a company in advance and then waiting patiently for a long enough time is what is needed. The rewards are great.
The best way to notice consumer monopolies is to visit various stores. If you find the same product on all the stores you visited, chances are that it is a consumer monopoly. Watch for the advertising campaigns. If there is a blitz, rest assured that the company is not confident about the demand. If the advertising is subdued and regular, just to tickle your memory cells, there is a good chance that the monopoly is operating. Some companies don`t advertise at all; for example, Amrutanjan, the headache balm.
Many years ago in Pune, a man started stamping his name on all goods that entered the city. The stamp was inconspicuous, yet readily visible. He did not charge a farthing for stamping the goods. Traders let him stamp their goods thinking of him as some harmless eccentric person, and soon goods which did not have his stamp were overlooked by customers in the city. So the traders started coming to him for getting their goods stamped, and then he started charging a small fee. In due course, he became a rich man. He had created his own `Toll Bridge`.
http://www.marketsidea.com/article/article_bylanes.htm
www.financialindependenceuniversity.com
Imagine a river with a commercial district on one side and residential on the other. Now, imagine a bridge spanning the river, joining the two districts. And imagine that you own the bridge, and can charge a small fee for using the bridge. A few thousand cars pass over the bridge every day, and you charge each car a little something for using the bridge. I bet you have already started counting the money. Warren Buffet keeps this perspective in mind while choosing a stock.
Some basic advantages of such a `toll bridge` should be understood. One is that the cash register keeps ticking without a stop. The other advantage is that there are no sundry debtors. Further, the maintenance and expenditure is low and the profits can grow at a predictable rate, and that too for a number of years. If you (that is. the owner) do not become irrationally greedy and maintain the fees for crossing at a reasonable level, the customers will continue to use your bridge, and you will make money for a number of years to come.
Many businesses reach the status of a toll bridge because of the strong relationships their products build with the customers. The first sign of such a company is apparent when the customers demand the product by its brand name and don`t even know the name of the company that produces it. The second sign is that it has little, or no competition, and the third sign is that it is essential either as a necessity, or for its universal appeal, and, therefore, every store has to carry it.
Let us consider some examples in the Indian context. `Cadbury`s` chocolate, `Cherry Blossom` shoe polish (how many know the name of the company? (Viz. Reckitt & Coleman), `Dettol` disinfectant, `Aspro` and `Anacyn`--the headache cures--and `Amul` butter easily come to mind. In pharmaceuticals, Glaxo is one such name, which has many products in demand. Can any store afford not to have these products on their shelves? If the store does not have it, the customer just walks over to the next store and gets it.
Companies making such products are in a unique position. They have established the manufacturing process, people have accepted the quality and specifications, they do not have to invest large sums in the plant and machinery every year, and their supply chains and distribution network are well established. The net result is steadily growing profits. These companies have some more advantages. They do not need exceptional management, just an honest management capable of grabbing a good thing when they see it and not to make a mess of it. These companies do not require too much of research and development (R&D), as they invented the formula many years ago and their customers don`t want any change. Would you like Dettol to smell differently? A good friend of mine even used it as an after-shave for many years. The management may add a gift with the purchase of a bottle, or add a new flavor to the product range to grab a little extra of the market share, but a wise management will leave the main product untouched. In Dettol`s case, even the shape of the bottle is important.
Such structurally sound and `in-demand` toll bridges are great businesses to own. They give rise to plenty of free cash, which can be invested in building or buying another such toll bridge. These businesses survive through economic downturns, and continue to give the same returns. This feature makes it easier to predict their profitability. Value investors love this.
The return for the investor is on the one side the earnings per share (EPS) (or dividend) and on the other increase in the share price. If the annual EPS/dividend is predictable, and if the share is purchased at a low enough price, the investor is happy to get such a return year after year. Many times, we see such companies showing an increasing EPS trend. This is still better for the investor, because this increases the price of the share faster.
Much has been said and written about the intrinsic value of the business and how it is to be arrived at, but with insufficient justice to the discipline involved. Value investors eye the company first, but their decision to buy is a function of the price. Everything else about the company may be perfect and the value investor may be itching to own a part of it, but a disciplined investor will wait for the right price. Once purchased, the stock is not sold for a long time. The argument is simple. Why give away something `good` till something `better` comes along? Remember that a good toll bridge has a minimum life of 25 years. If the EPS is in the region of 20% and above on the price you paid, calculate the compounded value at the end of those 25 years and see for yourself. Yet there is a sad side. Like everything else in this world, bridges also deteriorate. Weather and time take a heavy toll of steel, and the bridge becomes unsafe. Those car owners who drove to work over that bridge for a number of years realise that the bridge is no longer safe and avoid using it. Some competitor senses the unease and builds a new bridge, and the owner of the original bridge dies an unsung death.
We know what happened to some automobile companies from the pre- liberalisation days. From the mid-50s to the mid-80s, Premier Padmini and Hindustan Motor`s Ambassador were the two cars ruling the market. For years, they continued to thrive without making any major changes in the models, and Indians had no choice but to buy those cars. Whatever was produced was sold, and that too against cash. Sub-standard goods were produced for years and dumped on the helpless customers. With little R&D and no improvement in the basic car, these plants were just waiting to receive a deathblow, and `Maruti` did just that. Customers had found another safer, newer, and cheaper bridge.
Sometimes, some management decisions cause problems. Excess cash poses a problem. The management does not know what to do with it, and then instead of buying another toll bridge, or improving the existing one, it buys a pyramid, which is just a tourist attraction and a place for the dead. The pyramid bleeds the parent company, and finally both perish. Acquisitions and mergers are good, but only of the same kind. In the recent past, we have seen the merger of Times Bank with HDFC Bank. Synergy in operation was evident, and the balance sheet proved it. The market also appreciated it, and the shareholders have reaped the benefit.
It is easy to say that one should invest in such `consumer monopolies`, as Warren Buffett calls them, but it is another thing to actually buy these shares. No one has monopoly over such a wisdom, and generally we find these shares selling at a high P/E multiple. Yet, occasionally, these shares sell at low prices. John Neff`s advice is worth following while waiting for a good price. He advices the investors to regularly scan the `New Lows` list in the financial newspapers. If you have earmarked a share, then this list alerts you when it starts coming down. Consider this example, In March 2000, Glaxo hit a new low of Rs 422. In August, it is trading at 480/490. Reckitt & Coleman hit a new low of Rs 192 in March. Now it is trading around 210/220. If someone had earmarked the share, then surely it was a good time to buy.
Sometimes, a `consumer monopoly` company remains unnoticed for a long time. These are the companies engaged in manufacturing some product, without which the big guns cannot do. An example could be that of a company manufacturing some critical chemical required for steel making. This company may also own the patent for the product and, thus, the monopoly remains assured for a long time. Such companies spend very little on advertising and, hence, are not widely known. Some event of social or political nature makes it conspicuous, and suddenly the great value of the share gets unlocked, and the price starts climbing. Mario Gabelli, a well-known investor from the US calls the event a `catalyst`. Noticing such a company in advance and then waiting patiently for a long enough time is what is needed. The rewards are great.
The best way to notice consumer monopolies is to visit various stores. If you find the same product on all the stores you visited, chances are that it is a consumer monopoly. Watch for the advertising campaigns. If there is a blitz, rest assured that the company is not confident about the demand. If the advertising is subdued and regular, just to tickle your memory cells, there is a good chance that the monopoly is operating. Some companies don`t advertise at all; for example, Amrutanjan, the headache balm.
Many years ago in Pune, a man started stamping his name on all goods that entered the city. The stamp was inconspicuous, yet readily visible. He did not charge a farthing for stamping the goods. Traders let him stamp their goods thinking of him as some harmless eccentric person, and soon goods which did not have his stamp were overlooked by customers in the city. So the traders started coming to him for getting their goods stamped, and then he started charging a small fee. In due course, he became a rich man. He had created his own `Toll Bridge`.
http://www.marketsidea.com/article/article_bylanes.htm
www.financialindependenceuniversity.com
Warren Buffett on Investing
Warren Buffett, probably the greatest investor of his generation, rarely communicates his investment ideas in writing to the general public. And why should he? If someone has that extra edge when it comes to making money from the stock markets, he would rather use it for himself rather than go around sharing it. But once a year, he makes an exception to the rule and does give out his way of thinking through the annual letter he writes to the shareholders of Berkshire Hathaway. Other than this he has given many speeches over the years, which have given the general public some idea of the way he thinks. Here are a few of these gems which he has shared with his shareholders over the years through his letters and speeches.
1. Buy the business and not the stock
The speech titled, 'The Superinvestors of Graham and Doddsville,' delivered to the students of Columbia Business School in 1984, remains the most famous speech that Buffett ever made. This speech was delivered at a seminar held to celebrate the 50 years of the publication of Benjamin Graham and David Dodd's book Security Analysis. Benjamin Graham was Warren Buffett's Guru at Columbia School and all the years that Graham taught there Buffett was his only student to have got an A+ grade. And Buffett, as we all know, has surely lived up to that grade. This speech elucidated his firm belief in the principle of value investing. Value investors, he said, "search for discrepancies between the value of a business and the price of small pieces of that business in the market." Hence, the only thing they are bothered about is "how much is the business worth?" As Buffet said in the speech, "He's not looking at quarterly earnings projections, he's not looking at next year's earnings, he's not thinking about what day of the week it is, he doesn't care what investment research from any place says, he's not interested in price momentum, volume or anything. He's simply asking: What is the business worth?" And hence, as Buffett points out in the speech about value investors. "While they differ greatly in style, these investors are, mentally, always buying the business, not buying the stock." As we all know, the question 'how much is a business worth?' is not easy to answer and depends on how closely the investor follows the business of the company he is investing in and the understanding he has of that particular line of business. Buffett himself follows this and does not invest in businesses he does not understand. Information technology is one sector he has consciously stayed away from even at the height of the technology boom.
2. Buy when the stock prices are low
One of the peculiar things about stock markets is the fact that investors like to buy when the markets are doing well and the stock prices are on their way up. This is not the best way to invest given the fact that in everyday life we like to buy more of something only when the prices are low. Buffett explains this point in his letter to the shareholders for the year 1997. "A short quiz: If you plan to eat hamburgers throughout your life and are not a cattle producer, should you wish for higher or lower prices for beef? Likewise, if you are going to buy a car from time to time but are not an auto manufacturer, should you prefer higher or lower car prices?" "These questions," he goes on, "of course, answer themselves. But now for the final exam: If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period? Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall. In effect, they rejoice because prices have risen for the 'hamburgers' they will soon be buying. This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices."
3. For investors as a whole, returns decrease as motion increases
Getting into stock because everyone around you is and hoping to make money from it money successfully is not everyone's cup of tea. As more and more investors get into the same stock, and price rises, the chances of making money from the stock go down. In his 2005 letter Buffett wrote, "Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac's talents didn't extend to investing: he lost a bundle in the South Sea Bubble, explaining later, 'I can calculate the movement of the stars, but not the madness of men.' If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: 'For investors as a whole, returns decrease as motion increases.'"
4. There is a thin line separating investment and speculation
Buffett explains this beautifully in his letter to the shareholders in the year 2000. "The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money." "After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities -- that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future -- will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There's a problem, though: They are dancing in a room in which the clocks have no hands."
http://www.marketsidea.com/article/Index_articles.htm
www.financialindependenceuniversity.com
1. Buy the business and not the stock
The speech titled, 'The Superinvestors of Graham and Doddsville,' delivered to the students of Columbia Business School in 1984, remains the most famous speech that Buffett ever made. This speech was delivered at a seminar held to celebrate the 50 years of the publication of Benjamin Graham and David Dodd's book Security Analysis. Benjamin Graham was Warren Buffett's Guru at Columbia School and all the years that Graham taught there Buffett was his only student to have got an A+ grade. And Buffett, as we all know, has surely lived up to that grade. This speech elucidated his firm belief in the principle of value investing. Value investors, he said, "search for discrepancies between the value of a business and the price of small pieces of that business in the market." Hence, the only thing they are bothered about is "how much is the business worth?" As Buffet said in the speech, "He's not looking at quarterly earnings projections, he's not looking at next year's earnings, he's not thinking about what day of the week it is, he doesn't care what investment research from any place says, he's not interested in price momentum, volume or anything. He's simply asking: What is the business worth?" And hence, as Buffett points out in the speech about value investors. "While they differ greatly in style, these investors are, mentally, always buying the business, not buying the stock." As we all know, the question 'how much is a business worth?' is not easy to answer and depends on how closely the investor follows the business of the company he is investing in and the understanding he has of that particular line of business. Buffett himself follows this and does not invest in businesses he does not understand. Information technology is one sector he has consciously stayed away from even at the height of the technology boom.
2. Buy when the stock prices are low
One of the peculiar things about stock markets is the fact that investors like to buy when the markets are doing well and the stock prices are on their way up. This is not the best way to invest given the fact that in everyday life we like to buy more of something only when the prices are low. Buffett explains this point in his letter to the shareholders for the year 1997. "A short quiz: If you plan to eat hamburgers throughout your life and are not a cattle producer, should you wish for higher or lower prices for beef? Likewise, if you are going to buy a car from time to time but are not an auto manufacturer, should you prefer higher or lower car prices?" "These questions," he goes on, "of course, answer themselves. But now for the final exam: If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period? Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall. In effect, they rejoice because prices have risen for the 'hamburgers' they will soon be buying. This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices."
3. For investors as a whole, returns decrease as motion increases
Getting into stock because everyone around you is and hoping to make money from it money successfully is not everyone's cup of tea. As more and more investors get into the same stock, and price rises, the chances of making money from the stock go down. In his 2005 letter Buffett wrote, "Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac's talents didn't extend to investing: he lost a bundle in the South Sea Bubble, explaining later, 'I can calculate the movement of the stars, but not the madness of men.' If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: 'For investors as a whole, returns decrease as motion increases.'"
4. There is a thin line separating investment and speculation
Buffett explains this beautifully in his letter to the shareholders in the year 2000. "The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money." "After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities -- that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future -- will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There's a problem, though: They are dancing in a room in which the clocks have no hands."
http://www.marketsidea.com/article/Index_articles.htm
www.financialindependenceuniversity.com
Monday, September 1, 2008
What Does Warren Buffet Invest In?
http://sec.gov/Archives/edgar/data/1067983/000095013408015283/v42827ve13fvhr.txt
Click the link above to see what Berkshire Hathaway and Warren Buffett invest in.
You can use the SEC's web site to see what is in a lot of mutual funds.
Click the link above to see what Berkshire Hathaway and Warren Buffett invest in.
You can use the SEC's web site to see what is in a lot of mutual funds.
Monday, August 25, 2008
PCC Dogs Investors
Portland Community College has been dogging a guy who wants to start a student based investment group.
PCC initially denied the group, then said, call such and such. Then such and such wouldn't answer her phone. Then there was a new student groups person, who hasn't answered emails from my friend for two weeks.
I do not see the problem with an investment club on a college campus. Stanford had an investment club.
Maybe the problem is with politics? Well, Buffett, Soros, and Peter Lynch are all left wingers, so what is the problem?
Between the Democratic Convention, and this incident, here's a toast, to a sheeple nation.
PCC initially denied the group, then said, call such and such. Then such and such wouldn't answer her phone. Then there was a new student groups person, who hasn't answered emails from my friend for two weeks.
I do not see the problem with an investment club on a college campus. Stanford had an investment club.
Maybe the problem is with politics? Well, Buffett, Soros, and Peter Lynch are all left wingers, so what is the problem?
Between the Democratic Convention, and this incident, here's a toast, to a sheeple nation.
Tuesday, February 12, 2008
Warren Buffett Facts
There was a one hour interview on CNBC with Warren Buffet, the secondrichest man who has donated $31 billion to charity. Here are some veryinteresting aspects of his life:
1.) He bought his first share at age 11 and he now regrets that hestarted too late!
2.) He bought a small farm at age 14 with savings from deliveringnewspapers.
3.) He still lives in the same small 3 bedroom house in mid-town Omaha,that he bought after he got married 50 years ago. He says that he haseverything he needs in that house. His house does not have a wall or afence.
4.) He drives his own car everywhere and does not have a driver orsecurity people around him.
5.) He never travels by private jet, although he owns the world'slargest private jet company.
6.) His company, Berkshire Hathaway, owns 63 companies. He writes onlyone letter each year to the CEOs of these companies, giving them goalsfor the year. He never holds meetings or calls them on a regular basis.
7.) He has given his CEO's only two rules. Rule number 1: do not loseany of your share holder's money. Rule number 2: Do not forget rulenumber 1.
8.) He does not socialize with the high society crowd. His past timeafter he gets home is to make himself some pop corn and watch television.
9.) Bill Gates, the world's richest man met him for the first time only5 years ago. Bill Gates did not think he had anything in common withWarren Buffet. So he had scheduled his meeting only for half hour. Butwhen Gates met him, the meeting lasted for ten hours and Bill Gates became a devotee of Warren Buffet.
10.) Warren Buffet does not carry a cell phone, nor has a computer onhis desk.
11.) His advice to young people: Stay away from credit cards and investin yourself.
1.) He bought his first share at age 11 and he now regrets that hestarted too late!
2.) He bought a small farm at age 14 with savings from deliveringnewspapers.
3.) He still lives in the same small 3 bedroom house in mid-town Omaha,that he bought after he got married 50 years ago. He says that he haseverything he needs in that house. His house does not have a wall or afence.
4.) He drives his own car everywhere and does not have a driver orsecurity people around him.
5.) He never travels by private jet, although he owns the world'slargest private jet company.
6.) His company, Berkshire Hathaway, owns 63 companies. He writes onlyone letter each year to the CEOs of these companies, giving them goalsfor the year. He never holds meetings or calls them on a regular basis.
7.) He has given his CEO's only two rules. Rule number 1: do not loseany of your share holder's money. Rule number 2: Do not forget rulenumber 1.
8.) He does not socialize with the high society crowd. His past timeafter he gets home is to make himself some pop corn and watch television.
9.) Bill Gates, the world's richest man met him for the first time only5 years ago. Bill Gates did not think he had anything in common withWarren Buffet. So he had scheduled his meeting only for half hour. Butwhen Gates met him, the meeting lasted for ten hours and Bill Gates became a devotee of Warren Buffet.
10.) Warren Buffet does not carry a cell phone, nor has a computer onhis desk.
11.) His advice to young people: Stay away from credit cards and investin yourself.
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