alex.moskalyuk

I finished reading The Warren Buffett Way, 2dn edition by Robert G. Hagstrom. Or, rather, finished listening to it, since I bought a 2-tape set for my daily commute. The #2 person on the Forbes list and chairman of the company with the very weird name Berkshire Hathaway has cult-like followers in the investment world. Since Mr. Buffett is worth $44 bln, having started as newspaper delivery boy, he must be doing something right.

The book talks about Warren Buffett from a biographer’s point of view, so it’s not a financial title specifically, and not as jam-packed with useful tips as The Motley Fool Investment Guide. It’s a slow book teaching the principles of Warren Buffett’s investments.

Lessons learned

• Analyze business prospectives, not current stock price. Is it a well-managed company? Do they have a room to grow? Do they have nice margins?
• Understand the industry you’re investing in. Easier to discern hype this way. Invest in the businesses you have understanding of. You have to be able to mentally envision the flow of dollars from customers to businesses, understand where the money is spent and how profit margins are established.
• Market is manic-depressive. Stock market tends to be either over-zealous about a given company/industry or over-pessimistic. It’s either king of the world or the dumpster, if you follow the stock market ups and downs. However, if you stick to investing in companies, not their current stock prices, you can forget about tracing your investments on day-to-day basis.
• Avoid commodity businesses. Don’t invest in the business whose product can be easily reproduced by a lower-expense competitor.