Buffett how to play the stock market

Easy to understand the investment business

"If you do not hold a stock for 10 years to prepare, then 10 minutes should not hold such stocks", which is a master of Warren Buffett for investment in the basic attitude of investing in stocks. This article further analysis of Buffett's long-term investment philosophy, and Buffett has recently analyzed the performance of shares, as investors to enter the overseas stock market for reference.

Never hit a record loss

If Buffett's Berkshire Hathaway 32 years of year-on-year investment performance standards with the United States - S & P 500 index performance compared to Buffett can be found in which to beat the 29-year index, only three years behind index, more valuable when the United States is one of the five-year trend of the stock market correction into a short time when a record year Buffett has "never lost" records. Buffett's investment philosophy is therefore not only for him to create a staggering 23 billion U.S. dollars of wealth, and its stock selection method is also very worthy of study global investors.

Buffett's stock selection method is studied under the guidance of the basic school master the Graham (Ben Graham) and Philip Fisher (Philip Fisher). The former to "quantitative analysis" mainly, the latter to "qualitative analysis" for the good, Buffett is set both in Dacheng.

Graham's first "safety margin" (Margin Of Safety) of the sound investment ideas, he believed that the value of its shares at the end of the real value in (Intrinsic Value), the existence of such a stock that is "safety margin", so he suggested that investors will spend in identifying undervalued stock price, regardless of market performance. As a result of quantitative analysis of his contribution to future generations have recognized him as the father of financial analysis. Graham "No loss" investment philosophy, Buffett has become the future圭臬pursued.

Fisher is that investment growth rate is higher than average, profit growth and relatively excellent management company. He and Graham, the biggest difference is that the mere reading Fisher, the company's financial reports is not sufficient to determine whether the investment should be, but as far as possible from those who are familiar with the company to obtain first-hand information, this approach has become Stock fund managers prerequisite before. Buffett type of investment in these two methods to develop them.

Buffett to the end of 1996 to the investment portfolio (Schedule abbreviated) to illustrate, in which eight major shareholders the market value of Berkshire Hathaway accounted for 27.75 billion U.S. dollars in the year the market value of 87 percent stake, if this such shares by the end of 1996 so far calculated rate of return, in the 14 months to a combination of return on investment rose further to 37.72 percent.


Niche-oriented steady

Buffett observed that eight shares held, almost every stock is a well-known world-renowned companies, including Coca-Cola as the world's largest beverage company, Gillette razor is to facilitate 60 percent share of the global razor market, American Express Bank American Express card and traveler's checks is an indispensable tool for cross-border travel, Wells Fargo Bank of California, the largest commercial real estate market and among the top ten U.S. banks, Freddie Mac is the United States the two major residential lending industry, one of Disney in the acquisition of city / ABC after to become the world's largest communication and entertainment companies, McDonald's also the world's largest fast-food industry, the Washington Post is the United States, one of the most respected newspapers Profitability also much higher than the same industry.

Analysis of the common characteristics of these enterprises, is that each company have a strong market niche, which have resulted in these enterprises have Buffett so-called "concession" (Franchise), and with the general's "commodity" (Commodity) different. Buffett of such simple definition of the concession, it is about consumers in a store to buy a commodity (such as Coca-Cola or Gillette razor), although there are other similar competing products, but consumers will still be crossing the street to find this types of commodities. And the advantages of such products in the foreseeable future it is very difficult to change, and this is his "long-term investments" and even "permanent investment" fundamentals factors.

Buffett is more important is the operation of such enterprises are bright prospects for the "OK", so he's relatively sharp decline in investment risks, he for many institutional investors often buy stocksapproach rather not, because in the company excessive number of cases, managers simply can not in depth every company operating conditions and the results of some of the funds actually increased the risk of loss.

For significant increases in recent years, many high-tech stocks, Buffett also admitted that because he could not know more about this industry, so he "avoid" technology stocks. The reason is that there is a world stock market have a large number of technology companies, but no one sure which companies will eventually come to the fore, with its involvement in high-risk investments, not as good as "steady" to invest their own familiar territory, because Buffett's faith is "easy to understand the investment business."
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