Eliminate bad habits_ develop good habits slowly

							Eliminate bad habits, develop good habits slowly
Customary one: select value stocks
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Buffett's view, is the company's intrinsic value based on stock
prices, if a company has good prospects and a high of growth, then the intrinsic value
as the business increases, the stock price Zui Zhong Neng Fan Ying its value.
Therefore, his investment philosophy is to buy companies, not stocks, he said:
"The real value of our investment will not hot stock as an investment
selection criteria."
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Specifically, Buffett's investment return rate index used to measure the
intrinsic business value of investments. A listed company's earnings ability,
even the best growth, that is the embodiment of its own value. When buying them and
after long-term holders, if they can not rely on the enterprise's profits to
investors substantial compounding income, it is not an investment value of the stock.
Buffett's valuation method is to directly invest in a business given our rate
of return on investment, which is equivalent to a company able to provide us with
long-term deposit rates.
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Buffett said: "As long as the equity business is full of hope and a
satisfactory rate of return, or managers capable of performing their duties and honest,
and the market prices are not overvalued in this business," he was
"quite content to hold any long-term Securities. "
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Buffett, the value of stock selection method is mainly reflected in its financial
principles:
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1     focus on return on equity, not earnings per share
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Most of the investors through the company's annual earnings per share to
determine the performance, to see if they record or over the previous year significant
progress. But since the company has retained earnings as part of the previous year, to
increase the company's capital and surplus growth (automatic growth and
earnings per share) becomes meaningless. When the company announced loudly,
"record earnings", when investors were misled to believe the
operator to perform better year after year. To measure the performance of each year a
more realistic approach is: return on equity - operating income and equity ratio,
because it has taken the company to gradually increase the capital.
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2     computing "shareholders surplus"
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Ability to generate cash business determines its value. Buffett to identify those
generated over the cash necessary to operate the company, which will continue to
consume cash in the company excluded. But in determining the value of a business, it
is important to understand that not all of the surplus are the basis of equality under the
created. High fixed assets company, with the company for a lower fixed assets, will
need more of retained earnings, Yin Wei Yi Bufen surplus must be allocated out, Yi
Wei Chi and enhance Naxie value of the assets, therefore, need to be adjusted to Huiji
surplus reflect the ability of some cash.
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Buffett to provide a more accurate formula, he called the "shareholders
surplus." Decided to shareholders the surplus to depreciation, depletion
and amortization costs plus net profit, and then subtract those companies to maintain
their economic status, and sales of capital spending.
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3     looking for high- margin company
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High gross margins reflect not only a growing business, but also reflects the operator
to control costs tightly with spirit. Buffett appreciate the attention to the concept of
the cost of the operators, while laissez- faire cost offensive expanding operators. As
the shareholders who indirectly profit enterprises have been operator wasted every
penny, will deprive shareholders. Over the years, Buffett has been observed to have
high operating costs are normally seek to maintain or subsidize the cost approach. But
lower than the average cost of the company, most proud of in their own way to find
spending cuts.
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4     For every dollar retained earnings, determine the company has created at least
the market value of a dollar
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This is a fast and easy financial test means, it does not only tell you the advantages of
business, while also letting you know who Ruhe rational distribution company
operating the 资源. With the company's net income minus all dividends
paid to shareholders, the remaining is the company's retained earnings.
Now, coupled with ten years the company's retained earnings. Next,
identify the company's current market value and its market value ten years
ago, the price difference. If your business in this decade to switch between the
investment in unproductive retained earnings, the market will ultimately set this
business in cheap price. If the market value of the change is less than the sum of
retained earnings, the company will embark on the path of decline. But if your
company has been able to earn higher than average return rate of retained earnings,
corporate profits should rise in market value will exceed the sum of retained earnings,
so that every dollar to generate more than a dollar of market value.
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Buffett's Berkshire Hathaway stock has never dividend, stock split-off,
therefore, for long-term holding, or even a lifetime shares held by Berkshire
Hathaway for people who are can not get any cash flow. The reason there is no
dividend, the reason is very simple, because Buffett believes that if profits reinvested,
can produce the equivalent purchasing power higher than the investment return, then
the investment is successful.
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Used two: choose the safest stocks
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Buffett has often been quoted saying: "Investment is not to lose money the
first criterion; second criterion is to never forget the first." This is an
important principle Buffett buying stocks. Can be said that Buffett's
success is due largely to follow the principle of no loss, he chose the stocks are
generally very high "margin of safety." From this point on
Berkshire's results can be seen.
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From 1965 to 2006, in 42 games with the market a lo ng battle, we have to Berkshire
compared with the S & P 500. Buffett which lost only 6 games, winning rate
is 85       7%, particularly from 1981 to 1998 to overcome the market for 18
consecutive years. Can be seen from the above Buffett's success: first, to
minimize the loss of the annual number of investment priority is to avoid losses,
Buffett is also the root causes of extreme importance margin of safety; second, to
maximize profits The annual number of Berkshire has 6 in 40% of annual profits,
while the S & P 500 has one year are not available. Thus,
Buffett's profits from the margin of safety.
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The role of margin of safety: the main is to reduce the risk and increase return on
investment. Margin of safety is a huge volatility on the stock market uncertainty and
unpredictability of a prevention and insurance. With a larger margin of safety, even if
the market price lower than the value of a long period of time, we can still net profit
and equity growth, to ensure the safety of our investment capital and achieve a
satisfactory return. If the company stock prices fall further, but we have a greater
margin of safety can buy more shares of the company.
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Buffett's "margin of safety" Choose method of
Graham from the teacher. Graham said this: "I dare to be refined into the
secret of successful investments words of the motto: margin of safety." As
the core concept of value investing, if the margin of safety in the area of investment in
the value of the supremacy of was not excessive. Its definition is very simple and
plain: the real value or intrinsic value and price of the surplus, for a more popular
view, margin of safety is worth the price to be undervalued compared to the degree or
extent .
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By definition, only when the value is underestimated when it is a security margin or
margin of safety is positive, when the value and price when the margin of safety
equivalent to zero, and when the value is overvalued does not exist when the safety
margin or safety margin is negative. Value investors only undervalued, especially
serious underestimation of the object to be interested. Margin of safety is not
guaranteed to prevent the loss, but can guarantee a profit opportunity more than the
loss of opportunities.
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Buffett said: "Our equity investment strategy is premised on sustained and
effective, we can use attractive price buy attractive stocks. Of investment people,
buying a great company to pay too much stock prices, this will be offset by blue chip
companies in the next 10 years to create value. "In other words, ignore the
margin of safety, even if the buying company's shares outstanding will be
difficult because of the purchase price is too high and profits. This is, for
today's Chinese stock market, especially the role of a wake- up call.
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If you want to delay margin of safety to how to do? Then only two words: wait.
Investment in our lifetime, we do not want do not need to do transactions every da y,
We often cash in hand, patiently waiting, as the market trading Qunti the irrational, in
an uncertain period of time, Biru 3 to 5- year cycle, always wait until the perfect
moment of high safety margin. In other words, market failures will always bring
undervalued opportunities, then this is the time when you shot. Lions as the African
savannah, when it does not prey more slowly in the grass and so on, very patient
observation of the surrounding circumstances, until the game was swift shot into the
ambush area. If your portfolio many times in the cumulative results of this investment,
the long term, you will get an opportunity far beyond the market return. Therefore, the
margin of safety in grasping the core of the relationship between risk and return.
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From the defense point of view, on the margin of safety more of a grasp of the art of
survival. Investment such as the march to fight, first make sure the enemy is not
destroyed is the first element of combat, otherwise everything will be impossible. This
is in a bull market environment, in a serious bubble market, is particularly important.
Margin of safety is not isolated, it is "intrinsic value" basis, in
the "intrinsic value" of the calculation, the expected rate of
return is the most flexible parameters, expected yields and the margin of safety in the
enlargement to tend a result, it is relatively low purchase price. While the operation
level, the proportion of stage position control can also be seen as the adjuvant use of
margin of safety measures.
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Buffett, the principle reason why great emphasis on margin of safety, have asked for a
certain margin of safety, the underlying reason for this is affecting the stock price and
company factors that very heterogeneous. The contrast, the predictive power of people
is very limited, it is easy to forecasts errors. Has made significant margin of safety,
even if the assessment of the value of our company ha ve a certain error, market prices
in the longer period Rengdi Yu 价值, Corporate Development Shoudao temporary
setback, would not hamper our investment capital security and Bao Zheng We obtain
the lowest level of satisfaction with returns. This is the essence of the principle of
margin of safety.
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Habit 3: Select the familiar stock
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There is a saying in China is "not familiar with do not do
business." Buffett has a habit is to choose the familiar stock, shares that are
not familiar with the never elected. For those financ ial position, business conditions,
managers do not understand the basic situation and so on, are not familiar with the
company was right even hype, Buffett has never interested in, much less to invest it,
buy its stock. Buffett often says: "Investment must adhere to rational
principles, if you do not understand it, do not action." He believes that a
person's energy is always limited, the stock market shares are thousands of
different companies engaged in different businesses, these businesses can not be that
we are all familiar with and understand. Better focus our limited company on our
familiar, as much as possible about the situation of these enterprises, which is
conducive to our investment decisions.
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Buffett likes to buy good companies with the potential, if he bought at a reasonable
price that has a sustainable competitive advantage he can bring in huge returns for his
company, would not easily shot, casually sell them. Buffett bought the company are
very familiar with the company he does not understand, do not know, can not clear the
company, Buffett never easy to buy. Buffett's long-held eight of shares -
Coca-Cola, Gillette, American Express, Wells Fargo Bank, Federal Home Loan
Mortgage Corporation, Disney, McDonald's, Washington Post, etc., can be
found in almost every home is well-known world-renowned companies, and holding
time in 3 to 5 years. Name "Coca Cola", who like to drink
people know that it is the world's largest beve rage company, in every
corner of the world to sell Coca-Cola, each of the stalls on a playground, a small
counter stations, cinemas, supermarkets markets, hotels, bars hotels and so on all
kinds, both large and small counter Coca-Cola's shadow can be seen,
although difficult to distinguish between people Coca-Cola and Pepsi and other
similar drinks taste the difference, but "Coke" brand has gained
recognition, as long as people want to drink carbonated drinks, Coca-Cola will
naturally choose. "Gillette" is to facilitate the razor market
dominates the global brand, long beard, all the world around them men and women
will know that Gillette razor, even though tens of thousands of enterprises around the
world produce razor However, nearly 60% of the world of men would choose to use
the razor, "Gillette" brand. Convenient, comfortable, durable
features make it a man's favorite things. Therefore, he has invested heavily
in the Gillette Company, and holds the company's stock so far. Small razor
neither complex mystery, convenient and durable, each used the
"Gillette" razor's people to understand their function
and performance, is very approachable everyday life partner, people familiar and easy
to understanding. We can understand the stock held by Warren Buffett:
Buffett's most valued companies or enterprises are closely linked with
public life, and these products is extremely accessible, there is no myster y and
complexity to speak of. This confirms Buffett advocates simple rejection of complex
investment philosophy.
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Because they insist that the stock does not deal with unfamiliar customs, so he always
just buy some share of traditional industries, not to touch those high-tech stocks. In
early 2000, when Internet stocks climax, Buffett did not buy. Time, we agreed that he
had left behind, but now, looking back, a group of dot-com bubble buried crazy
speculators, Buffett has once again demonstrated its strong investment style master,
become the biggest winner .
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Habit 4: stock selection and not paying attention to enterprises attach importance to
price
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Attention to the inherent nature and underestimate the importance of corporate stock
is one of Buffett's stock selection of the important habits. When Buffett
engaged in investment, he observed a complete picture of the company, and most
investors only observe the stock price only. They spend too much time and energy to
observe, predict and hope that the price change, but rarely take the time to understand
their hands holding company's operating condition. This basic attitude of
the different, resulting in the general investors and Buffett fundamental differences.
Buffett has an interest, and managed a wide range of companies, that everything
should be hand in to the experience of Buffett and other professional investors to
distinguish.

Buffett believes that investors and entrepreneurs should be the same way to observe a
company, because they actually want is the same. Entrepreneurs hoped to buy the
whole company, but investors want to buy part of the company's stock. If
you ask an entrepreneur, when he bought a company, when what he wanted, the
answer often is: "How much of this business to generate cash?"
In theory, entrepreneurs and investors in order to profit, should be to note that the
same variables.
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Buffett believes short-term price to determine the success of a company is stupid.
Instead, he wants the company to report to him was a result of economic growth in the
value of strength. Once a year, he regularly checks a few variables:
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(1) the initial rate of return on equity;
(2) operating margin, debt levels and capital expenditure requirements change;
(3) the company's cash generating capabilities.
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Buffett adhere to the value-oriented investment, several decades. He specializes in
analysis of business fundamentals, always repeated, carefully read the candidate
shares quarterly, annual reports and various financial information, and even
competitors are well aware of the situation. Every time before making investment
decisions, he always weigh more than 20 times in the heart, before eating a standard
action. For example, Buffett bought Gillette shares reasons is this:
"Whenever I go to sleep before the thought of tomorrow, there will be 2.5
billion when the men had to shave, my heart will Emission trace of joy. Gillette b lade
more than 100 years of history. every year around the world use 200 to 21 billion off
the blade, which produced 30% of Gillette, the market share of 60% is Gillette.
Gillette blade market share in some countries had reached 90%. "So, he
has invested heavily in Gillette.