Keeping Things Simple When Looking at a Stock

Tom Sirois

I have spoken with countless people (professionals and non-professionals) regarding stock they are invested in. Though many may “sound” intelligent describing the minutia as to why a particular company is a good investment. For long term investing, I think Warren Buffett has a great way to describe what HE looks for.

Here are four items he utilizes BEFORE he invests in a company by buying their stock:

  1.  Any Good Investment Idea Can be Put in One Paragraph: most great companies are simple and easy to understand (think Coke or McDonalds)
  2.  Circle of Competence and NO Called Strikes: know what you are good at, and do not pick a company at a bad price. Make your BEST decision always.
  3. Invest in great businesses that have a terrific person running it: Peter Lynch once said: “buy a business that is so good that any idiot can run it because sooner or later one will”.
  4. These businesses are hard to find, so do not sell them: Buy at the right price, and you will not need to sell these stocks.

A great video that wraps this all up is found here: Warren Buffett on Investment Analysis

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