In terms of dollar amounts, if you had invested $1,000 in Berkshire Hathaway about 30 years ago, your investment today would amount to about $500,000. The lesson is clear: Learn from Warren Buffett’s investment philosophy, which is described throughout this book. You may not be able to attain his level of success, but you do not have to be Warren Buffett to earn respectable returns in the stock market. If you can replicate even, say, one-fourth or one-third of the advantage he has over the market, you will earn very high long-term returns. The average investor is likely to be a relatively small investor. It is easier to beat the market with smaller amounts of money than with large investments.

When Buffett ran his partnerships in the late 1950s to late 1960s, his returns were even larger. Now, Buffett cannot invest in smaller companies because the Berkshire portfolio is so large. But a small investor has the advantage of being able to invest in smaller companies. For Berkshire as a whole, returns were higher when the company was smaller, but even over the past 15 years, the average annualized return has been 12 percent compared with only about 6 percent for the S&P 500 index.

You never know: You might have the skills to pick the right stocks and become as good an investor as Warren Buffett. As long as you are not reckless, there is little downside in trying to find out whether you have some of the skills to be successful. One great thing about Buffett is that he has written generously about what he does and how he does it. If you have patience and the willingness, let’s start learning about businesses and investing from the master.

The reality isn’t so grim. If Greece defaults on its debt some country’s and banks (mostly the IMF) will loose money, and probably a fair bit of it. Defaulting on debt isn’t a new revelation though it has happened to the majority of countries regardless of size or stature and will likely happen to them again. As Reinhart puts it in his book, This Time is Different: Eight Centuries of Financial Folly:

“Greece’s default on debt reached an almost pandemic re-occurrence at the turn of the century… Greece has been in default roughly one out of every two years since it first gained independence in the nineteenth century.”

On a local level a default of government debt is disastrous, on a national level painful; on an international level it is nothing more than an inconvenience. Have no doubts about it, if Greece defaults it will likely effect the overall confidence of investors in the west. But a default in Greece should not have any direct and sustained impact to those economies not directly tied to the rise and fall of Greece’s national debt and bond structure.

Similar Posts:

A recent mass layoff at my company has given me a fresh perspective on layoffs. Normally, as an investor, we see layoffs as a courageous way to drive profits forward by shaking off some areas of weakness. I have personally invested in companies shortly after a mass layoff if I believe that such changes will benefit the profitability of the business. From a purely financial perspective viewing a company as a machine is an easy thing to catch one’s self doing. However there are some soft costs involved in layoffs to a company culture that I wasn’t really aware of until the week after I witnessed fellow employees walking out the door for the last time:

The Straw that breaks the Camels back. Employees remaining after a layoff will fear that this is the first of many layoffs- this is only to be expected. This fear will most assuredly drive them to explore other opportunities and possibly accept them. Everyone would rather leave on their terms rather than finding a box on their desk in the morning. The intent of a layoff is to keep your best; unfortunately it can have the opposite effect of driving your best into the arms of a competitor.Showing a company’s financial health. If you work at a private company getting a gauge on the overall health of a business is a difficult task. There is no clearer message about health than to see a layoff in action. If employees are already feeling under appreciated or under paid the message “no pay raises in the foreseeable future” will come through loud and clear during a layoff, again driving your best talent to explore other options outside the company.The belt tightening turns into a corset. No one really likes to work in a company doing belt tightening- belt tightening usually means there is a better way to do things and we are going to choose the cheaper way. Anyone with pride in their work will not thrive under this environment and innovation is often stunted.Dad kicks your sibling out of the house. Creating a family atmosphere is critical in getting people to go above and beyond. If you expect employees to take a panicked call from you at 2AM when your servers crash then family is key. When a company does a layoff it shows how that the family dynamic is vulnerable and the trust that both parties share for one another can be broken.

What makes a company successful in the long term is its service, innovation, management, and products. All of these do not happen without good people. From a short term perspective layoffs make the company more viable but from a long term perspective it can seriously damage the culture and effect the good people who you need to run the business in the future.

Similar Posts:
http://www.dividendmonk.com/

This is a great article overall. I think investors have a habit of looking at “cost reductions” in a rather robotic way instead of considering the human element, and so it is certainly a good idea to take a step back once and a while and consider the mindset of the company and its employees.

Layoffs don’t necessarily mean bad financial health. Johnson and Johnson, for example, recently performed some layoffs to increase profit margins even though they are doing quite fine. Some companies just do it to improve their numbers, not that I agree that they should.

-Matt

I always have a running list of great companies I would buy if they were priced a whole lot differently- my wish list you might say. Being value investors we all spend a lot of time trying to differentiate between garbage and gold. Usually when I am looking at a company it has hit my screens because it is suddenly cheap – my job is to find out if there is a good reason or a bad reason for this, and invest accordingly. This activity can take some time, days, sometimes even weeks. Some opportunities simply don’t last that long though, they can dry up in a matter of a day, an hour or even mere minutes.

To prevent a great opportunity from slipping through my fingers I often have a running wish list. This list is comprised of high quality companies with great leadership, and solid books, they meet all but one of my criteria to invest- they aren’t trading at a discount. The P/E might be too high or the dividend yield is just not where I need it to be.

As an example let’s pull three off my list Visa, Cisco and P&G. In my opinion great companies with great management, great products and a solid sustainable competitive advantage. The reality of it is though that they all sport a P/E that is far too high to merit an entry point- in my opinion. During turbulent days though like last month these stocks drop by impressive rates. At these times my wish list turns on and we buy what we can. On news of the sudden crash I was out having lunch and quickly returned back to my office to file a few trades from my list.

So what do you have on your buying wish list and why?

Similar Posts:

It remains to be seen how this change in behavior may continue after the end of this crisis, i.e., over the next 3-5 years. If it is a permanent change, it will likely be positive for the gold industry as it will provide a wider and more diverse base, thereby removing the quirkiness associated with Indian marriage seasons and similar factors.

Indian consumption remains the only bright spot in the jewelry scene, with jewelry consumption in rest of the world down significantly. This may be due to the fact that India has been spared the brunt of the global recession so far. However, jewelry consumption could drop sharply once reality sets in and the Indian market starts to reflect the global economic headwinds.

Investment Considerations

1. One of the most noteworthy emerging factors in the market is the SPDR® Gold Shares (NYSE: GLD) exchange-traded fund (ETF). GLD has more than 1,000 tonnes of gold under management and has become a market mover of the price of the underlying metal (the tail wagging the dog).
2. Since the beginning of 2008, GLD has built up a substantial lead in gold holdings over similar ETFs.
3. Gold investment in Europe increased by more than 10x in 2008. Europe is now the biggest net retail investor in gold. Vietnam and the U.S. led in this category until 2006.
4. In the U.S., gold investments declined in 2007 but rebounded strongly in 2008. More than 75 tons were consumed for investment purposes in the U.S. last year.
5. More people are now buying gold for investment than for consumption.
6. Sales of gold bars and coins have more than tripled recently, while sales of jewelry (biggest consumer) declined 3% in 4Q08.

Consumption Considerations

1. While gold prices, measured in U.S. dollars, were choppy in 2008, prices were more stable when measured in Euros.
2. India is still the world’s biggest consumer of gold at 147 tons in 4Q08, followed by China, Europe and the U.S. India briefly ceded its lead to the U.S. last year but has once again regained the lead. India accounts for 21% of worldwide gold consumptions.
3. Indian jewelry consumption more than doubled in 4Q08 versus the year- earlier period, while it declined in many other countries, including a staggering 57% decline in Turkey.
4. The U.S. exports far more gold than it imports.

Production Considerations

1. The U.S. is the world’s third-largest producer of gold (230 tons annually), trailing South Africa and China. The U.S. gold mining industry employed 9,200 people in 2008, and the U.S. accounted for close to 10% of global mine production.
2. U.S. production has declined nearly 10% since 2006.
3. Official sector sales declined 27% in 4Q08, suggesting that central banks may be hoarding more gold than in the past.

Analysis of Market Dynamics

Gold prices exhibited uncharacteristically high volatility in 2008, driven primarily by U.S. dollar exchange rates. Gold and the dollar have an inverse relationship, and the dollar experienced quite a ride last year. However, when gold prices are measured in Euros, 2008 was not very volatile, with prices showing an upward trend. While price movements during 2008 may have primarily reflected a weaker dollar, gold now appears to have become a bet against all major paper currencies.

The gold market appears to have fundamentally changed from one that is highly dependent on Indian jewelry demand to a market that appears to be driven by renewed investment interest, including greater demand for bars and coins in Europe and the U.S. While it is unclear whether this represents a permanent change or simply a reflex reaction to collapsing markets, the outlook for gold prices appears bullish. The gold market may overcome the seasonal fluctuations associated with the Indian marriage season. This represents an important shift from the past.

Best practices for managing projects in agile environments—now updated with new techniques for larger projects

Today, the pace of project management moves faster. Project management needs to become more flexible and far more responsive to customers. Using Agile Project Management (APM), project managers can achieve all these goals without compromising value, quality, or business discipline. In Agile Project Management, Second Edition, renowned agile pioneer Jim Highsmith thoroughly updates his classic guide to APM, extending and refining it to support even the largest projects and organizations.

Writing for project leaders, managers, and executives at all levels, Highsmith integrates the best project management, product management, and software development practices into an overall framework designed to support unprecedented speed and mobility. The many topics added in this new edition include incorporating agile values, scaling agile projects, release planning, portfolio governance, and enhancing organizational agility. Project and business leaders will especially appreciate Highsmith’s new coverage of promoting agility through performance measurements based on value, quality, and constraints.

This edition’s coverage includes:

• Understanding the agile revolution’s impact on product development
• Recognizing when agile methods will work in project management, and when they won’t
• Setting realistic business objectives for Agile Project Management
•  Promoting agile values and principles across the organization
• Utilizing a proven Agile Enterprise Framework that encompasses governance, project and iteration management, and technical practices
• Optimizing all five stages of the agile project: Envision, Speculate, Explore, Adapt, and Close
• Organizational and product-related processes for scaling agile to the largest projects and teams
• Agile project governance solutions for executives and management
•  The “Agile Triangle”: measuring performance in ways that encourage agility instead of discouraging it
• The changing role of the agile project leader

Price: $47.99

Click here to buy from Amazon

if you could only have four ratios to evaluate a company what would they be? This is a fun question that is popular in investing circles. For a laugh I’ll take my shot at it, what would you pick?

Current Assets / Current Liabilities

This ratio keeps track of the company’s ability to pay its short term debt. If a company doesn’t have safety money to deal with debt then they might not be in business tomorrow and I don’t need any of that.

Annual Dividend Per Share / Price Per Share

As a buy and hold investor I like to get paid to hold the investments. A nice yield makes for a little reward for patience.

Dividends/Net Income

Getting a great yield now is perfect, but how can you be sure that this dividend won’t get canceled as soon as you buy the stock- you don’t. One way of keeping an eye on this is to look at the payout ratio. If too much of the income is being eaten up with a dividend then beware that dividend might get cut or at least it sure isn’t going to increase in the near future.

If a company increases its dividend on a regular basis the returns over the long term can be jaw dropping. The future of a dividend can be more important than the present.

So how about you, if you only had four ratios what would you use?

Fundamentals Current Assets, Current Liabilities, current ratio, Dividend Growth, Dividend Payout Ratio, Dividend Per Share, dividends, Investments, Investor, Money, Net Income, Patience, Ratios, Share Price, Stock, Term Debt Similar Posts:
Financial Uproar

Mine would be:

1) Current Ratio- Ditto to your comments

2) Price to Book- I like buying a dollar for less than a dollar. I’m cheap like that.

3) Debt to Equity- I try to avoid companies with lots of debt

4) Dividend Yield- While a dividend isn’t really that important to me if I like a company, I do like to get paid. Even if the company is about to be cut.

http://www.dividendmonk.com/

I like your list. My third three would likely all be the same as yours: dividend yield, payout ratio, and growth rate.

I’d probably use one of two different metrics in place of current ratio, though. Likely I’d replace it with LT Debt/Equity for large companies and Insider Ownership for small companies.

simon

1) net current price to book ratio, I like knowing what the company would be worth if it went bankrupt compared to market price.
2) debt to equity , this is interesting to me because it shows how leveraged the company is.
3) current ratio, ditto
4) average price to earnings over the last 5-10 years depending how long the business has existed. Shows that the company can be profitable.

Anonymous

As an investor, why would you invest in a company that doesn’t pay dividend on a regular basis?

value investor

I would agree with you. I like to see a solid dividend- otherwise it starts to look more like gambling rather than investing.

Shannon Kawane

I like current ratio. I think payout ratio is good to evaluate sustainability and if the company has the right priorities (ie, too much payout compared to capital investment). I recommend focusing on other ratios that are closer to the source of dividends. Ratios like Price/Sales and Sales Growth Rates. A company that doesn’t know how to grow its sales will not be successful in maintaining its dividend.

After a hiatus it is time to start posting again. We are going to be retooling, and setting a new direction for the site. This site is going to get away from posting stock analysis, there are loads of other sites that do this quite well. Instead we are going to talk about things that interest me that have to do with finance and investing. Not sure what it will be but hope it will appeal to you too! Let’s see where we get to.

Similar Posts:

It is very difficult to get a true gauge of the economy, the media is full of pundits and economists who create a dizzying amount of idle speculation. Getting down to brass tax is critical. When evaluating a business as a potential investment I often find myself in similar circumstances- too much information. To get past the noise I find the best thing to do is to focus on the fundamentals. In looking at the overall economy I think a similar approach can be taken.

The Vancouver port is one of the largest on the western sea board.  If you are exporting odds are the product went through this port. If you are importing odds are it came through. If we want to evaluate the overall health of the economy looking how the inbound and how outbound shipments have varied is at the very least an interesting prospect and perhaps can also provide some insight into the overall health of the economy.

Click on the image for a larger view. I have added in a shading to indicate the period when the recession occurred in Canada and how, in turn, the Canadian market responded.

Similar Posts:

I am a big fan of companies that make it a regular habit of dialing up a dividend. This is why I have been such a proponent of the dividend aristocrat group. Nothing perturbs me more though than to buy into a 2% dividend stock that I believe will crank up its rate only to be forced to wait multiple years before seeing that increase. To counteract this here is a simple parachute that can increase your confidence that a rate will increase.

In order to be confident that our investigations will be worthwhile it is important to see how long key people stay with the company. If the CFO, CEO and others are spinning through the company like a revolving door then your company has changed or is changing- investigation into it’s past may not indicate likely actions in the future. If however you find that current key positions have been with the company for some time then we can proceed with our investigation.

A payout ratio shows you what percentage of the net income is being paid out to shareholders. These rates can be anywhere from 10% -110% depending on the dividend paying company’s industry and financial condition. Having a low rate doesn’t necessitate a dividend increase, or conversely having what appears to be a higher rate doesn’t mean that an increase won’t happen. The task is to see what that payout ratio was the last few times an increase was done. This information can be found by understanding how the dividend payout ratio is calculated (Dividends / Net Income) and then retrieving the information from previous year’s financial statements on morningstar or the company’s own investor page.

People are creatures of habit. I have found that if you have the same CFO, CEO and the same payout ratio as the last time a dividend rate was increased you are very likely to see the same again. Conversely if these factors are not present you are very likely to end up disappointed despite what you might think is a fair current payout ratio. Simple but true.

Similar Posts:
jim

That’s a good, simple piece of advice to look for at a company, thanks for posting it!

value investor

Thanks Jim- simple is the name of the game.

ken

Do you think GE will raise there dividend this year?
Thanks

value investor

GE is not a stock that I hold so my opinion on this certainly wouldn’t be educated enough to suggest an answer. However I know that Buffett does speak highly of the management of the company and from what I have read they are embracing the position that they made mistakes, have fixed them and want to get back to business as usual as soon as possible- based on that I would guess (and like I said it would be a guess) that dividend growth will be in GE’s 1-2 year picture.