Warren Buffets investment portfolio history is filled with successes and fruitful investments. However, investors remain curious about the ways through which this financial master mind likes to invest in stock. The first and the foremost method adopted by Warren Buffet is deep research of the company. It is reported that the financial whiz reads at least five newspapers on a daily basis. Each and every investment done by Warren Buffet till date has been based on in depth research that aims to analyze the financial position and the ability of the company to generate returns over a long period of time. Warren Buffet does not like to buy the stock based on market hype and speculation rather than focuses on analyzing the company at hand before undertaking the investment. He is reported to invest in stocks of companies that he truly understands such as Coco Cola and Dairy Queen. He refrains from investing in stocks of companies that he does not understand or is unsure of their businesses processes.
Warren Buffet likes to invest with the use of his intellect rather than temperament. He ascertains that all emotions must be kept in check as it is the ability to truly control your emotions which could ultimately lead to success. Warren Buffet likes to invest over long periods of time as opposed to continuous buying and selling based on market price. He states that long term trading is likely to result in higher gains as opposed to continuous trading based on speculation of market. Warren Buffet believes in his own judgment and does not let others opinion rule his Money Forum investment decisions. He believes that the research done before investment is sufficient enough to allow him to continue to hold stocks over a long period of time. Furthermore, he also invests in stocks that are undervalued and have a high intrinsic value.
Warren Buffet refrains from investment into companies that have high gearing ratio and prefers those that have virtually no debt. This is because, he thinks that high debt results in the inability of the company to generate sufficient return to the equity holders as the cash generated is used in repayment of capital and interest payments. He focuses on those companies that have high operating profitability and are able to generate sufficient amount of profit available to equity holders. Moreover, Warren Buffet prefers to invest in a limited number of companies as he states that too much diversification will result in overall lower returns. This is based on the view that there is no logic in investing in low return companies simply because of diversification. He continues to invest in promising companies where he already has a sufficient amount of investment so that the gains from investment continue to increase. It is held that Warren Buffet invests like a girl; this defines that Warren Buffet takes all the precautionary steps that are required before undertaking an investment. He also does not focus on various investments rather than concentrates on a few stocks that generate high return.
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