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Firstly I'd just like to point out that the following question may flag the reader as some sort of cheap, novice attempt to turn a incredibly complex concept into something fast and easy, like a hack method. However, that's NOT what I'm trying to do.

Recently I read Graham & Dodd's Modern Approach to Investing, and for anyone that doesn't know is an updated on the original "bible" of Warren Buffet's investing approach - analyzing a company's balance sheet, assets, debt, cash on hand etc.

What I'm wondering is whether this whole process can be simplified down into some basic checks, let's say, that every investor should know and can apply.

Or what I mean is, instead of devoting 10 years to studying corporate financing, assets and debt leverage etc, are there a few basic rules that can come from such an approach that in the meantime can be applied on a daily basis?

Let say someone wants to invest in ABC Company, and all the signs and outlook are well, but would like to apply a bit of Warren Buffet style checks before committing. What would those steps look like?

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    Google "warren buffett stock screener criteria" and note there are plenty of articles giving an attempt at an answer. YMMV of course. – JB King Nov 17 '16 at 6:54
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    Buffet made a few lucky guesses. In the world of gamblers, there had to be one or two who were lucky a few times in a row. Those one or two we then think of as "successful". – Fattie Nov 17 '16 at 12:57
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    @JoeBlow That is your opinion but there is a large difference between hard work and knowledge vs being "lucky a few times". – Ross Nov 17 '16 at 16:41
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    @JoeBlow He turned a few thousand dollars into $70,000,000,000. Luck has nothing to do with it. – zeta-band Nov 17 '16 at 16:48
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    You can look back to interviews with Buffet to understand some of his thinking - he doesn't invest in anything he doesn't understand the use for, which is a big reason (according to him in an interview many years ago) about why he avoided investing in the tech market and instead went for investments like Dairy Queen and BNSF. It doesn't take special acumen to do that - it requires discipline and patience, and he has a long-term view on his investments. He understands fundamentals because he bothers to pay attention to them. – Daniel Anderson Nov 17 '16 at 17:30
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Warren Buffet isn't using any special sauce. He looks for value and ignores hype, greed, and fear. He buys what he knows and looks for companies that generate cash and/or are available for a discount of their true value.

He explains what he looks for in a company and his reasons for buying it. He has said on numerous occasions, "I look for intrinsic value." (So there's your formula.)

Human nature is often irrational and investing seems to bring out the fear and greed. I've always been a bit surprised when people ascribe some sort of sixth sense to Warren Buffet's success. He just works hard and doesn't deviate from a sound strategy. "Be fearful when others are greedy and greedy when others are fearful."

And of course, rule one: "Don't lose money." It's not a joke. How many people buy high and sell low because of fear and greed? When the market tanks, buy more.

Finally, anyone can invest with Buffet without all the work. Just buy a few shares of BRK.A or BRK.B.

  • Are there any similar companies (like Berkshire Hathway) that invest in some more 'ethical' companies? Also, what platform to use to buy shares in such companies? (from Europe) – Cloud Jan 18 '18 at 16:51
  • @Cloud Which of BH's companies do you feel are "unethical"? – D Stanley Jan 19 '18 at 14:26
  • @DStanley Please.... Coco-Cola, Dairy Queen... – Cloud Jan 19 '18 at 14:34
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Easy. Get interested in 5, 10 or 20 companies depending on your time, interest and budget and study them in detail. Decide for yourself what you think they should be worth now, and what they should be worth in a years time, and what your margin of interest is. Update your valuations every day/week/month or when you can be bothered. If their shares go below what you think they are worth by more then your margin, buy some. If they go above what you think they should be worth by more then your margin, and if you have enough to spare, sell some. If you are right, you make money, if you are wrong, wait until the market comes back to you. You only lose if a company screws up and ceases to have any value, which suggests you didn't study it closely enough.

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