Mr. Buffett's Owner's Manual - Warren Buffett Value Investing by Equitymaster
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Mr. Buffett's Owner's Manual

In his letters especially from the earlier years, Mr. Buffett had followed the practice of putting out a list of key points that a company needs to satisfy if it wished to get acquired by his investment vehicle, Berkshire Hathaway. The reproduction of those key points will act as a perfect conclusion to our report as it also summarizes the key points covered in this report.

Laid out below are the key points that Mr. Buffett has mentioned in most of his earlier letters to shareholders. He looks to invest in companies, which have -

  1. Demonstrated consistent earning power (future projections are of little interest to him, nor are 'turnaround' situations),
  2. Businesses earning good returns on equity while employing little or no debt,
  3. Management in place (Mr. Buffett says that he can't supply it),
  4. Simple businesses (if there is lots of technology, Mr. Buffett will not understand it),
  5. An offering price (Mr. Buffett will not like to waste his time or that of the seller by talking, even preliminarily, about a transaction when price is unknown).

Since all the above points are self explanatory, we do not intend to add anything more except for a small quote from Mr. Buffett, which you should go through so many times that it remains forever etched in your memory.

Mr. Buffett once famously said:

"Only follow two rules in investing

Rule#1: Do not lose money, and
Rule#2: Do not forget Rule no. 1"

If one devotes his investment lifetime to strictly following what we have outlined in this note and also the above quote of Mr. Buffett, he is likely to emerge a much wealthier person than most of his peers.

Homepage: Value Investing with Warren Buffett

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