|The fundamental Stocks Investor Warren Buffett
Invest in the business
It was Graham who taught Warren, instead of asking
(a) in what enterprise? and
Warren places a great amount of weight on the quality of a company when he makes his investment decisions. One way to determine the quality of management is to see what it does with its earnings.
Does it pays out dividends, or retain them?
If it pay out dividends, does it profitably employ them, or does it squander them on dreams of grandeur?
He began to base his investment decisions on the economic nature of
the business. The excellent business with high rates of return on
equity, identifiable consume monopoly and shareholder - oriented management
became his primary target.
Invest for the long terms
A depressed market makes it easier for our insurance companies to buy small pieces of wonderful businesses - including additional pieces of businesses we already own - at attractive prices. And third, some of those same wonderful businesses, such as Coca-Cola, are consistent buyers of their own shares, which means that they, and we, gain from the cheaper prices at which they can buy.
Overall, Berkshire and its long-term shareholders benefit from a sinking stock market much as a regular purchaser of food benefits from declining food prices. So when the market plummets - as it will from time to time - neither panic nor mourn. It's good news for Berkshire.
Warren Buffett Books from Amazon
Essays of Warren Buffett : Lessons for Corporate America