Key in on industries likely to grow and promising companies in that Industry positioned for growth

Buy stocks as you would your groceries not perfumes (?)

Margin of safety principle

There’s a difference between investment and speculation. Speculation is buying when stock is cheap in the hopes that it will rise.

Invest more in bonds and equities over common stock

Be careful of hot stocks,

Dollar cost averaging Invest in strong companies with long record of profitable operations and in strong financial condition Consider investing in well established investment funds, trust funds instead of your own portfolio

Price and value

Familiarize yourself with the history of the stock market, the relationship between fluctuations in stock price and dividends paid out

  • Adequate but not excessive diversification (Diversify your stock holding Btwn 10-30)
  • Each company selected should be large, prominent and conservatively financed
  • Each company should have a record of long dividend payments ( beginning in 1950)
  • Investor should impose some limit on the price he’ll pay for an issue in relation to its avg earnings over say the past 7 years ( set limit to 25 x avg earnings and not more than 20 x those of the last 12 month period) -( price earning multiplier)

This rules out growth stocks … So one has to be careful with them. Uncertain and risky

Has earnings increased at rate of stock price

Big gains achieved by investing in new issues or rapid growth companies usually go to those with close ties to the company

A new issue is not a bargain unless its indicated value is at least 50% more than its price . To evaluate a bargain look at future earnings and value of business to a private owner (future earnings, net current assets and working capital)

If a company of interest has it stock price going down check to see how steady its earnings have been and if it has a way to meet its financial commitments

Investment approaches

  • look for big sound companies going through a temporary bad time or unpopularity . A sound company going through legal battles could be a bargain.

Never buy a stock immediately after a substantial rise or sell immediately after a susbstntial drop. Buy wisely when prices drop sharply, sell wisely when prices rise sharply. Pay more attention to dividend returns and operating results of the company.

Margin of safety ( total value of enterprise against debt) is needed

Don’t let your optimism drive your decisions, let you calculations do

You are neither right or wrong because the crowd agrees or disagrees with you. You’re right because the data stays sound and you should apply courage to that