Robert G Hagstrom has beautifully explained about Buffett way of Investing through his book “THE WARREN BUFFETT WAY”. The following are some key points along with other quotes by Warren Buffett that are self explanatory in itself that should be followed by a smart investor.
The business tenets will keep you focused on companies that are relatively predictable. If you stick to those with a consistent operating history and favorable prospects, producing basically the same products for the same markets, you will develop a sense of how they will do in the future. The same is true if you concentrate on businesses that you understand; if not, you won’t be able to interpret the impact of new developments.
Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be mis-appraised- Warren Buffett, 1988
“We just focus on a few outstanding companies. We’re focus investors.” Warren Buffett, 1994
The management tenets will keep you focused on companies that are well run. Excellent managers can make all the difference in a company’s future success.
(Together, the Business and Management tenets will give a good sense of the company’s future earnings potential)
The financial tenets will reveal the numbers you need to make a determination of the company’s real value.
The value tenets will take you through mathematics necessary to come up with a final answer: Based on everything you have learned, is this a good buy?
Any investor must weigh two factors: Is this company a good value, and is this a good time to buy it means, is the price favorable? Because “Price is what you pay. Value is what you get”. It’s bad to go to bed at night thinking about the price of a stock. We think about the value and company results; the stock market is there to serve you, not instruct you – Warren Buffett, 2003