Investing Basics

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• INVESTING BASICS

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• Buy Profits at A Discount
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• Pay 0.50 for 1
• George Soros
• Markets are constantly in a state of
  uncertainty and flux and money is made by
  discounting the obvious and betting on the
  unexpected.
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Investing Rules

• Rule 1 Dont Lose Money
• Always Play Defense
• Rule 2 Circle of Competence
• Stick to What You Know
• Build On Your Strengths
• Rule 3 Margin of Safety
• Pay a Fair Price for an Excellent Business
• Pay less than Liquidation Price for a
  Cigar-butt
• Rule 4 Mr. Market is Your Friend
• There Will Be Years a Good Stock Is Down 40 -
  70
• Herd Psychology

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Investing Principles

• Leave a margin of safety
• Be conservative in valuation assumptions
• Buy at a substantial discount to conservative
  estimate of intrinsic value
• Only buy businesses you understand (recognize
  limitations)
• Measure your success by the business operating
  performance. The stock price will eventually
  follow.
• Have a rational expectation on price
• Minimize frictional expenses (trading costs and
  taxes)
• Be alert - Keep your eyes open at all times
• Allocate capital by opportunity cost

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Excellent Business

• High returns on
• ROA
• ROE
• ROIC/ROCE
• Has little or no debt
• Has durable competitive advantages (moats)
• Is scalable
• Has Excellent and Owner-Friendly Management
• .when you find it, is the price attractive? 
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Durable Moats

• The dynamics of capitalism guarantee that
  competitors will repeatedly assault any business
  earning high returns. Need durable moats
• Lower Cost of Production, Brands, Economies of
  Scale, Patented Technology, Location,
  Distribution System, Specialized Services,
  Network, Regional Monopolies and Intangible
  Assets
• Buffett wrote An economic franchise arises from
  a product or service that (1) is needed or
  desired (2) is thought by its customers to have
  no close substitute and (3) is not subject to
  price regulation, i.e. has pricing power. The
  existence of all three conditions will be
  demonstrated by a company's ability to regularly
  price its product or service aggressively and
  thereby to earn high rates of return on capital.
  Moreover, franchises can tolerate mismanagement.
  Inept managers may diminish a franchise's
  profitability, but they cannot inflict mortal
  damage.
• Business history is filled with companies with
  weak and temporary moats. The criteria of
  enduring moat caused Buffett and Munger to rule
  out companies in industries prone to rapid or
  continuous change.
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Thank you..