Buffettology: The Previously Unexplained Techniques That Have Made Warren Buffett the World's Most Famous Investor

Product Information

ii adheres to a strict code of conduct. Contributors may hold shares or have other interests in companies included in these portfolios, which could create a conflict of interests. Contributors intending to write about any financial instruments in which they have an interest are required to disclose such interest to ii and in the article itself. ii will at all times consider whether such interest impairs the objectivity of the recommendation. I had also read by then a couple of other books from Mary Buffett (The Oracle’s ex-daughter in law, his son’s Peter ex-wife). She wrote several. This one will remind you, that when buying great businesses, it’s all about having a durable competitive advantage, a long product life ahead, with little change, little disruption probability, little capex requirement, so in other words tons of free cash flow. If you can buy this business when the price is fair or even better, when it’s cheap, then you never need to sell. First determine what you want to own, then wait for a good price. The price you pay determines your rate of return.

To figure this out, you'll need to estimate how much a company should realistically be worth five years from now, and such an estimate is only possible if a company has consistent earnings. In this case, the ongoing saving is 0.00%, of which 0.00% is paid by loyalty bonus. The tax that could be payable on this loyalty bonus, and therefore the value of this saving to you, is shown below.

Fund Objective

In the world of investing, the name Warren Buffett is synonymous with success and prosperity—now you can learn how Warren Buffett did it and how you can, too. If you desire to have a real increase in your purchasing power, then it is necessary that the return on your wealth be at least equal to the effects of inflation and taxation." Buffettology Notice that Buffett and Munger prefer companies which do not pay a dividend. This is because dividends lower retained earnings and therefore limit future growth. A company should only pay a dividend, according to the authors, if it has no better way of allocating the money, for example if a company has grown to the size of Apple (AAPL) and therefore has limited room for growth left. If you are looking for some ground-breaking Buffett investment revelation in this book, you'll be disappointed. But if you follow Warren Buffett, then you know that very little of his investment philosophy is truly ground-breaking, but that's the point. It's simple, but difficult to apply. Keith Ashworth-Lord: Very rarely. I mean, our portfolio turnover currently, if you exclude where we've had to sell things, say, for meeting redemptions or whatever, it's currently 7.5%, and that's high by historic standards. So no, we don't chop and change the fund. Like Buffett, our ideal holding period is forever.

Keith Ashworth-Lord: Yes, it's a very disciplined process. We start off looking for businesses with an economic moat, which effectively means they've got barriers to entry and they've got pricing power. And the way we go about it is we analyse the growth potential of the companies in their markets, the growth potential of the markets themselves. We keep a very wary eye on margin development because if you're growing you should be improving your margins. And just to give you the measure, I mean the average gross margin in Buffettology is 58%, and the average operating margin is 22%, so well above what the market averages are.T or F Mutual fund managers are short-term motivated because they market their products to an investment public that is extremely short-sighted. Examine the kinds of companies that capture Buffett's interest, and learn how you can use this information to make your own investment choices of the future There are dozens of books written on the topic of value investing, and many even claim to reveal the secrets that made superinvestor Warren Buffett billions of dollars. David Clark and Mary Buffett's bestselling book Buffettology , as the name suggests, belongs to the latter category, but the reason it stands out is that it actually delivers on its promise. Keith Ashworth-Lord: Very much so. What you were seeing there was a contraction of price-to-earnings (P/E) multiples on the investee companies that we own. And just to prove that point, 23 of our 27 companies in 2022 reported earnings or trading statements that were in line with expectations or even better than expectations. But of those 27 companies, 22 of them finished the year with their share prices down and in some cases down quite a lot. So, I can't stress really too much that the operating performance of the companies is absolutely up to scratch. And it's been purely a market phenomenon. This rotation, so-called rotation into value, which has affected the multiples that the market accords our companies.

We use a combination of fundamental and technical analysis in forming our view as to the valuation and prospects of an investment. Where relevant we have set out those particular matters we think are important in the above article, but further detail can be found here. Without some predictability of future earnings any calculation of future value is mere speculation. It is not difficult to see why, because retained earnings is the money that a company can reinvest into the company for future growth, and the return on equity determines to a large extend the extra income that will be generated from these investments. So the higher the retained earnings and the higher the return on equity, the faster the intrinsic value of a company will grow over time.

Fund Managers

The intrinsic value of an investment is the projected annual compounding rate of the return the investment will produce. Kyle Caldwell: Could you give a couple of examples of companies that you already hold that you've been topping up?