Warren Buffet's Methodology

Warren Buffett's investment system is carefully studied by new investors. His methods are inspired by Graham's fundamental investing tactics outlined in his book "The Intelligent Investor". Buffett, through years of using and adjusting Graham’s rules, created a set of his own. The methodology focuses on determining what a particular company's shares are worth. There are a few factors which can alter to a company's value, included in that set are the past performance, amount of debt, and cash on hand. Warren lists six easy steps to determine the real value of all companies. To determine if a company has always performed well, the net income of the company must be divided by the capital that the shareholders are paid. In step two the investor must check the value of debt owned by the company. If the company has a large outstanding debt it becomes a risky investment. To calculate debt the total liabilities is divided by shareholder equity. Then the investor must focus his attention to the profit margin. Are the profits high in the sector and are they increasing more than other similar companies? To calculate this the net income is divided by net sales.

The only question with wealth is, what do you do with it?

Buffett continues with more factors to consider - how long has the company had outstanding shares, do the company’s sales depend on a commodity, and if the stock of the company is priced at a 25% discount to it’s a good value "Buffett is one of only a few business leaders whose good name has remained unblemished by the collapse of so much of corporate America," is the way Patrick Hosking describes Buffett’s endless success and respect in the finance word. Warren Buffett is all business which makes it tough to find his personal life's philosophy and separate that from his business practices. In his own life, Warren "took several necessary steps through his leadership—establishment of a code of ethics, discipline of violators, and creation of an ethical advocate's role". Buffett’s greatest strength is his loyalty. He possesses and preaches to hold to a well educated trust in his system. His life and success are a shining example to the American ideals of self sufficiency, independance, and the self made man. Buffett is the true embodiment of the American Dream. “Warren Buffett's vacationstory.com">story is quintessentially American, “ states Cornell Rupert. His synics and contemporaries say his success is well earned. Warren employs honor, hard work, trustworthiness in his financial life.