Investing using Warren Buffet's approach

Warren Buffett's approach

Understanding Warren Buffet's well-known world-class value investing techniques is critical for all investors.  Knowing Warren Buffet's ways is necessary because he studies what are the main company parameters that are remembered and valuable for investors, allowing us to grasp his approaches to picking a firm for a solid investment.

He is the most successful investor in the world. He looks for what he calls:

• Franchise businesses that have powerful consumer brands,
• Businesses that are simple to understand,
• Robust financial health 
• Near-monopolies in the market.

He examines a company on four parameters

• It's Business - Getting to know the Business model.
• It's management.
• It finances.
• It valuation.

Buffet like's to buy a stock when a scandal, significant loss, or other negative news passes over it like a storm cloud such as when he bought coca-cola soon after its disastrous rollout of "new coke" and the market crash of 1987. 

He also wants to see managers who set and meet realistic goals build their business from within rather than through acquisitions allocate capital wisely and not pay themselves hundred-million dollar jackpots of stock options.

Buffet insists on steady and sustainable growth in earnings so the company will be worth more in the future than it is today. 

While evaluating a business Buffett looks at a company using three criteria.

• Simple business: Simple to comprehend how the business generates revenue and where the money originates from. A simple business is one that is simple to understand and shouldn't undergo significant changes over the course of ten or twenty years.
• Consistent operating history: Buffett prefers to invest in a business that has remained the same for decades. Businesses like Coca-cola and Gillette are businesses that have sold the same products and growing steadily. Buffett does not like to invest in a business that changes or gets distributed every few years due to technology or other changes. In that case, future earnings growth can not be predicted (which is important for calculating the intrinsic value of a business with certainty). He stays away from turnarounds as well as businesses that are changing their business model.
• Favorable long-term prospects: Buffett prefers to invest in companies that possess what he refers to as an "Economic moat". An economic moat is formed by a strong brand name, a patent, a high entry barrier, and a high cost of replacement.

Evaluating the management: 

• Is it rational? Buffett believes that one of the most important functions that management performs is that of allocator of capital.  
• Is management can do and honest. 

What is Business Model - The business model is how the company makes money. It also explains the sources of the company's revenue how many of these sources and how often. When evaluating a company as a possible investment learn exactly how it makes money. Then think about how attractive and profitable that business model is.

Understanding the principles of business, such as the business model, the nature of the firm, the client base, finance, management, and so on. Personally, I feel it is significant since it provides you confidence in your financial selections and allows you to get a higher return.

best wishes and keep investing.🙋🙋🙋🙋🙋🙋🙋💰💰💰💰💰🤑🤑

Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on Investment or recommend buying and selling any stock