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10

Ways To Get Rich!!


Warren Buffets secret that can work for you.

Reinvest

Your Profits

When you first make money, you may be tempted to spend it. Don't. Instead, reinvest the profits.

Be Willing To Be Different

Don't base your decisions upon what everyone is doing. Try to be different and above average.To be above average, you need to measure yourself by the Inner Scorecard, judging yourself by your own standards and not the world's.

Never Suck Your Thumb

Gather in advance any information you need to make a decision.

Spell Out.. The Deal Before You Start

Your bargaining leverage is always greatest before you begin a job -- that's when you have something to offer that the other party wants. Always nail down the specifics of a deal in advance -- even with your friends and relatives.

Watch Small Expenses

Exercising vigilance over every expense can make your profits and your paycheck -- go much further.

Limit What You Borrow

Living on credit cards and loans won't make you rich. Negotiate with creditors to pay what you can, work towards becoming debt-free.

Be Persistent

With tenacity and ingenuity, you can win against a more established competitor.

Know When To Quit

Know when to walk away from a loss, and don't let anxiety fool you into trying again.

Assess The Risk

Asking yourself "and then what?" can help you see all of the possible consequences when you're struggling to make a decision -- and can guide you to the smartest choice.

Know What Success Really Means

Warren Buffett- :"I know people who have a lot of money," he says,
"and they get testimonial dinners and hospital wings named after them. But the truth is that nobody in the world loves them. When you get to my age, you'll measure your success in life by how many of the people you want to have love you actually do love you. That's the ultimate test of how you've lived your life."

Warren Buffett- the Sage of Omaha


Ping Hu Matt Neeve Olena Olenchuk Rachel Caldie

Agenda
Bio Management style Investment approach Methodology

Biography/History
Bought first stock at age 11 Invested savings into farmland Had pinball machine business and sold for a profit Attended Columbia University where Ben Graham was a professor at the time Worked for Ben Graham for $12,000 a year

Biography/History
Opened his own partnership in Omaha By 1961, he had 5 partnerships In 1962, he merged partnerships to make Buffett Partnerships, Ltd. Bought stock for Berkshire Hathaway at $8 Bought Amex stock after fraud scandal Took control of Berkshire in 1965

Biography/History
Closed partnership in 1969 and worth millions personally In 1974 lost over 50% of wealth

In 1981 Buffett and Munger create Berkshire Charitable Contribution plan


Crash of 87 lost $342 million personally

Biography/History
Buffett worth $44 billion today Berkshire has $248 billion in assets CEO Charles Munger, vice-chairman
Met in 1959

Goal to increase 15% a year

philanthropy
85% of wealth given to philanthropy Bill and Melinda Gates Foundation
Health and learning $1.5 billion annually

The rest to foundations run by his children and founded by late wife

Management Tenets
Buffetts three management tenets concern the evaluation of management quality
Is management rational? Is management candid? Does management resist the institutional imperative?

Rationality
If a company generates high returns on equity, the duty of management is to reinvest those earnings back into the company, for the benefit of shareholders If the earnings cannot be reinvested at high rates, management has three options:

ignore the problem and continue to reinvest at below-average rates buy growth return the money to the shareholders, who then might have a chance to reinvest the money elsewhere at higher rates

In Buffetts mind, only one choice is rational, that is option 3

Candor
Buffett believes that a manager who confesses mistakes publicly is more likely to correct them

Managers who discusses the failures of the company with shareholders are admirable

Resisting the Institutional Imperative

What is the institutional imperative?


the lemming-like tendency of corporate management to imitate the behavior of other managers, no matter how irrational it may be

Buffett points out that thinking independently and charting a course based on rationality and logic are more likely to maximize the profits of the company than a strategy that can best be described as follow the leader

Management Style
He will not interfere with the running of the company. He will be responsible for hiring and setting the compensation of the top executive. Capital allocated to the business will have a price tag (a hurdle rate) attached.

Some Management Tips


Review annual reports from a few years back, paying special attention to what management said then about strategies for the future. Compare those plans to todays results: How fully were they realized? Compare the strategies of a few years ago to this years strategies and ideas: How has the thinking changed?

Compare the annual reports of the company you are interested in with reports from similar companies in the same industry. It is not always easy to find exact duplicates, but even relative performance comparison can yield insights

What type of investor is Buffett?


Value Investor
What is a value investor, and what makes Warren the best ?
Amex

The Buffett Way


So you say I can make great returns here?

Economic moat Intrinsic value Do what is the best for you, not what people think you should be doing.

Buffets famous statements


Rule No.1: Never lose money. Rule No.2: Never

forget rule No.1.


The stock market is designed to transfer

money from the active to the patient.


The most important quality for an investor is

temperament, not intellect.


"Risk comes from not knowing what you're

doing."

His Portfolio

performance

Berkshire Hathaways Class A shares vs. S&P 500

Berkshire Hathaways Class A & B shares vs. S&P 500

Methodology
1. Has the company consistently performed well?
ROE for 5-10 years

2. Has the company avoided access debt?


Small amount of debt indicating that earnings growth is being generated from equity as opposed to borrowed money

3. Are profit margins high? Are they increasing?


Look back at least 5 years

Methodology
4. How long has the company been public?
At least 10 years Recent IPO is not a target

5. Do the companys product rely on commodity?


Characteristics must be hard to replicate competitive advantage, or economic moat
Product must be distinguishable

Must not rely solely on commodity

Methodology
W. Buffetts most important skill!!!

6.Is the stock selling at 25% discount or at its real value?


Determine intrinsic value by analyzing business fundamentals:
Include analysis of earnings, revenues and assets Usually higher than its liquidation value

Compare companys intrinsic value to its current market capitalization


If intrinsic value is at least 25% higher company has value

conclusion
Complete understanding of the industry Value investing (based on fundamental analysis) Longevity (in established businesses, for long-term)

Questions?

Great Buffet Quotes:


"Someone's sitting in the shade today because someone planted a tree a long time ago." "Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway."

Sources:
http://www.investopedia.com/university/greatest/warrenbuffett.asp http://www.investopedia.com/articles/01/071801.asp http://www.investopedia.com/articles/06/threewisemen.asp http://en.wikipedia.org/wiki/Warren_Buffett http://finance.yahoo.com/

Thank You!