Warren Buffett Advice and Stock Market Investing

Warren Edward Buffett (born August 30, 1930) is an American investor, businessman and philanthropist. Buffett has amassed an enormous fortune from astute investments, particularly through his company Berkshire Hathaway, in which he holds a greater than 38% stake. With an estimated current net worth of around US$42 billion (Forbes: The World's Billionaires).

Warren Buffetts Advice and Investment approach

Warren Buffett Advice or approach to investing involves several different criteria for identifying good investments or stocks.  In a nut shell, Buffett looks for companies with healthy economics, preferring to acquire companies which possess sustainable competitive advantages and are undervalued by the market. The following are some questions to determine what business/stock to buy, based on the book Buffettology by Mary Buffett:

Advice Checklist 

1. Is the company in an industry of good economics, i.e., not an industry competing on price points. Does the company have a consumer monopoly or brand name that commands loyalty? Can any company with an abundance of resources compete successfully with the company?
2. Are the earnings on an upward trend with good and consistent margins?
3. Is the debt-to-equity ratio low or is the earnings-to-debt ratio high, i.e. can the company repay debt in few years from its earnings?
4. ROE is consistent over its history and high compared to industry averages? Is it more than 12%? Or does the company have high and consistent Return on total capital?
5. Does the company retain earnings for growth?
6. The business should not have high maintenance cost of operations, low capital expenditure or investment cash outflow. This is not the same as investing to expand capacity.
7. Does the company reinvest earnings in good business opportunities? Track record of management accomplishing these investments?
8. Is the company free to adjust prices for inflation?

Investment timing is also a crucial factor when buying stock.  Buffett's actions and advice has shown that he is not in a hurry to buy stock if the value is not identifiable. Buffetts advice shows consistent decision making regardless of stock market state (up or down market).

Then he asks at what price is the stock a bargain. See the complete Warren Buffett Advice Checklist. For Warren Buffett quotes visit the Warren Buffett Quotes section; if you are interested in books and biographies visit our sister site at Warren Buffett Biographies.

The goal of Warren Buffett Advice is to provide investors with a compilation of Buffett's numerous investments and accomplishments in a way that exposes Buffett's strategies and techniques. Warren Buffett Advice provides articles, news, quotes and investing checklists to aid in investing. Warren Buffett Advice is not endorsed or managed by Warren Buffett.