The Warren Buffett Way

Warren Buffett is one of the most successful stock investors in our time. In January 1996, he was named the richest American, with an estimated net worth of over $16 billion. In 1999, he is only second to his buddy Bill Gates with a net worth of about $40 billion.

When Mr. Buffett invests, he sees a business rather than just a stock price. He finds good companies that will do well even in a recession. He does his homework to find the real value of a company and to learn about its management. If the company stock price is considerably below the real value of the company, he quietly buys up as many shares as he can get.

He is not too concerned about the day-to-day fluctuations of the market. He is not worried about the up-and-down cycles of the economy. He holds onto stocks for a long time. He regrets every time he sold some shares because the stock has gone up to a much higher price.

You don’t have to buy millions of shares to follow the Buffett Way. As a small investor, you can apply the same strategy and do relatively well. In a nutshell, here is the Warren Buffett Way of investing:

Invest in a business that is simple and understandable, such as soft drinks, candy stores, and banks.
Invest in companies with a consistent operating history and favorable long-term prospects, such as Federal Home Loan Mortgage, Gillette, and Coke.
Invest in companies that have an international franchise and strong growth prospects, such as Coke, McDonalds, and Gillette.
Invest in companies that have a strong management team whose priority is to run an efficient operation in order to increase shareholders’ stock value, such as GEICO Insurance, Wells Fargo Bank, and Disney.

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