Warren Buffett works with a list of companies whose stock he would like to own. He compiles his list by studying companies and their management teams in considerable detail. His favorite type of stock is of a company with a uniquely competitive market position. Often the competitiveness arises from the strength of a brand name, such as Coca-Cola or Gillette. He buys a stock if and only if its share price drops below its long-term value (intrinsic value). He is prepared to wait years for an opportunity to buy stocks at the right price.
Buffett calculates the price he is willing to pay for a stock by estimating its future earnings. He then uses this estimate to predict what the stock will be worth in the future. In order to accomplish this with reasonable accuracy, he demands the company can demonstrate more-or-less consistent earnings growth for at least five years - preferably longer. Buffett buys stocks when their prices are at low enough levels to offer him a high probability of significantly outperforming returns offered by government bonds.
If stocks he likes don't reach his target price, Warren does not buy - no matter how much he may like the look of them. He says that paying too much for a stock is a good way to guarantee a poor return. If stocks he likes become available at or below his target price, he buys big. Then he waits. This is the "classic" and best-known Buffett investment method. (He has several.) After he has bought a stock, his preferred holding time is "forever," although he concedes that it is sensible to sell a stock if it becomes grossly overvalued. Over time, his stock buying decisions have been amply rewarded
Buffett calculates the price he is willing to pay for a stock by estimating its future earnings. He then uses this estimate to predict what the stock will be worth in the future. In order to accomplish this with reasonable accuracy, he demands the company can demonstrate more-or-less consistent earnings growth for at least five years - preferably longer. Buffett buys stocks when their prices are at low enough levels to offer him a high probability of significantly outperforming returns offered by government bonds.
If stocks he likes don't reach his target price, Warren does not buy - no matter how much he may like the look of them. He says that paying too much for a stock is a good way to guarantee a poor return. If stocks he likes become available at or below his target price, he buys big. Then he waits. This is the "classic" and best-known Buffett investment method. (He has several.) After he has bought a stock, his preferred holding time is "forever," although he concedes that it is sensible to sell a stock if it becomes grossly overvalued. Over time, his stock buying decisions have been amply rewarded
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