Warren Buffett: Four Characteristics of a Wonderful Business and Six Qualities of a Successful Investor
From The Money Masters by John Train
I was rereading the Money Masters by John Train and there was a interview with Buffett about two decades ago.
Where he was famous but not as famous as today and hence way more candid with sharing his views.
Even though this interview took place so long ago, his simple yet powerful investing concepts remains ever so timeless and relevant.
Buffett on The Four Characteristics of a Wonderful Business
1. Good return on capital without accounting gimmick or leverage.
2. Understandable businesses. One should be able to grasp what motivates the people working in them and why they appeal to their customers.
3. They see their profits in cash.
4. Strong franchises and thus freedom to raise prices
Buffett on The Six Qualities of a Successful
1. You must be animated by controlled greed and fascinated by the investment process. He believes that too much greed will control you but that too little will fail to motivate you.
2. You must have patience. His time frame is much longer than the average investor. He believes that you should buy into a company because you want to own it permanently, not because you think its stock will go up in price. His belief is that if you are right about the company and buy it at a sensible price, you will eventually see your stock appreciate.
3. Think independently. He believes that if you don’t know enough to make your own decisions, you should not make any decisions at all. He also quotes Benjamin Graham (the father of fundamental analysis) “The fact that other people disagree with you makes you neither right nor wrong. You will be right if your facts and reasoning are correct.”
4. You must have the security and self-confidence that comes from knowledge, without being rash or headstrong. IN effect, he is telling us that if we do not have confidence in our decisions because they have been poorly thought out, we are likely to be spooked as soon as the price goes against us.
5. Accept it when you don’t know something.
6. Be flexible as to the types of businesses you buy, but never pay more than they are worth.
Can’t Get Enough of Buffett?
Check out my summary of his letters from 1977 to 2020.
Read Here ➔ 17 Lessons From Warren Buffett’s Annual Letters To Shareholders
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