Bullbear Buffett

Keep INVESTING Simple and Safe (KISS) ****Investment Philosophy, Strategy and various Valuation Methods**** The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It’s true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!****Warren Buffett: Rule No. 1 - Never lose money. Rule No. 2 - Never forget Rule No. 1.

Wednesday, 19 November 2025

Additional notes: a collection of advanced insights and clarifications, focusing on the specific opportunities, pitfalls, and mindset of the enterprising investor.

Additional Notes.

Elaboration of Section 32

This section serves as a valuable appendix, offering a collection of nuanced insights, clarifications, and advanced considerations that build upon the core principles already established. It provides deeper color to the philosophy of the intelligent, enterprising investor.

The notes cover several key themes:

1. Refining the Enterprising Investor's Approach
The section begins by reiterating that the enterprising investor should start with a defensive base (high-grade stocks and bonds) and only then branch out into more opportunistic strategies. It emphasizes that these departures must be "well-reasoned."

It then provides a list of negative prescriptions—things the enterprising investor should generally avoid:

Avoid low-yielding corporate bonds.
Avoid inferior bonds and preferred stocks unless they are true bargains (at least 30% below par).
Avoid foreign government bonds.
Be wary of new issues (IPOs) and other "tempting" new financial instruments.

2. Sources of Opportunity for the Enterprising Investor
The notes outline the specific market conditions where an enterprising investor can find "attractive buying opportunities." These arise from discrepancies between price and value due to:

A low general market level (e.g., during a bear market).
Extreme unpopularity of a specific stock (e.g., a good company facing a temporary, solvable scandal).
The market's failure to recognize a company's improvement.
Complex corporate situations that hide true value, which "competent security analysis" can unravel.

3. The Evolution from Graham to Buffett
A crucial historical insight is offered: while Benjamin Graham's primary focus was on buying statistical bargains (his "Strategy 4"), he actually made the bulk of his personal fortune from a single, long-term investment in a wonderful company—GEICO (a "Strategy 3" investment).

The Implication: If Graham had lived longer, he might have placed even greater emphasis on buying and holding wonderful businesses at fair prices, a strategy his most famous student, Warren Buffett, perfected.

4. Warnings on Advisors and Market Structure
The section includes sharp warnings about the investment industry:

Be critical of free advice from friends and relatives, as "much bad advice is given free."
Understand the broker's conflict of interest: The stock market thrives on speculation, and brokers make money from activity. A truly professional, client-centric brokerage would have to advise trading less, which is not in its commercial interest.

5. The Mindset of the Successful Investor
The notes conclude with powerful mindset takeaways:

For a mature portfolio, the substantial dividend income can far exceed any potential gains from short-term trading, making the portfolio resilient to market downturns.
The ultimate strategy is to be "fearful when others are greedy and greedy when others are fearful," using market crises as opportunities to buy great businesses at discounted prices.
The critical distinction between timing (speculative forecasting) and pricing (the intelligent assessment of value) is reiterated. The intelligent investor focuses exclusively on the latter.

Summary of Section 32

Section 32 provides a collection of advanced insights and clarifications, focusing on the specific opportunities, pitfalls, and mindset of the enterprising investor.

Refined Strategy: The enterprising investor must have a well-reasoned justification for any move away from a defensive base and should avoid a specific list of generally poor investment types.
Sources of Profit: The key is to find discrepancies between price and value caused by market pessimism, neglect, or complexity.
Historical Context: The strategy of buying and holding wonderful companies (Buffett's approach) proved more lucrative even for the father of value investing, Benjamin Graham.
Industry Warnings: Investors must be wary of conflicts of interest in the financial industry and unsolicited advice.
The Winning Mindset: Success comes from a focus on pricing rather than timing, embracing market fear, and building a portfolio where sustainable dividend income ultimately outweighs the noise of short-term trading.

In essence, this section adds the final layer of sophistication to the intelligent investing philosophy, moving from the "what" and "how" to the nuanced "when" and "why," while reinforcing the discipline required to be truly successful.

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My 18 points guide to Successfully compounding your money in Stocks

Be a good stock picker.
Think as a business owner.
Always look at value rather than the price. Do the homework.
Buy and hold is alright for selected stocks.
Compounding is your friend, get this to work its magic.
Mr. Market is there to be taken advantage of. Do not be the sucker instead. BFS;STS.
Always buy a lot when the price is low.
Never buy when the stock is overpriced.
It is alright to buy when the selected stock is at a fair price.
Phasing in or dollar cost averaging is safe for such stocks during a downtrend, unless the price is still obviously too high.
Do not time the market for such or any stocks.
By keeping to the above strategy, the returns will be delivered through the growth of the company's business.
So, when do you sell the stock? Almost never, as long as the fundamentals remain sound and the future prospects intact.
The downside risk is protected through only buying when the price is low or fairly priced.
Tactical dynamic asset allocation or rebalancing based on valuation can be employed but this sounds easier than is practical, except in extreme market situations.
Sell urgently when the company business fundamental has deteriorated irreversibly.
You may also wish to sell should the growth of the company has obviously slowed and you can reinvest into another company with greater growth potential of similar quality. However, unlike point 16, you can do so leisurely.
In conclusion, a critical key to successful investing is in your stock picking ability.

http://myinvestingnotes.blogspot.com/2012/07/my-18-points-guide-to-successfully.html

11 Lessons From Peter Lynch

Peter Lynch taught me:

1. Behind every stock is a company. Find out what it’s doing.
2. Never invest in any idea you can’t illustrate with a crayon.
3. Over the short term, there may be no correlation between the success of a company’s operations and the success of its stock. Over the long term, there’s a 100% correlation.
4. Buying stocks without studying the companies is the same as playing poker – and never looking at your cards.
5. Time is on your side when you own shares of superior companies.
6. Owning stock is like having children. Don’t get involved with more than you can handle.
7. When the insiders are buying, it’s a good sign.
8. Unless you’re a short seller, it never pays to be pessimistic.
9. A stock market decline is as predictable as a January blizzard in Colorado. If you’re prepared, it can’t hurt you.
10. Everyone has the brainpower to make money in stocks. Not everyone has the stomach.
11. Nobody can predict interest rates, the future direction of the economy, or the stock market. Dismiss all such forecasts and concentrate on what’s actually happening to the companies in which you’ve invested.

Lynch’s advice had a profound effect on my stock market approach. He taught me that investment success isn’t the result of developing the right macro-economic view or deciding when to jump in or out of the market. Success is about researching companies to identify those that are likely to report positive surprises.

Capital Expenditure

A great company with a Durable Competitive Advantage will have a ratio of Capital Expenditures to Net Income of less than 25%. Less is better.

Capital Expenditures are expenses on:
- fixed assets such as equipment, property, or industrial buildings
- fixing problems with an asset
- preparing an asset to be used in business
- restoring property
- starting new businesses

A good company will have a ratio of Capital Expenditures to Net Income of less than 50%.

A great company with a Durable Competitive Advantage will have a ratio of less than 25%.

Less is better.

Benjamin Graham's 113 Wise Words

The true investor scarcely ever is forced to sell his shares, and at all times he is free to disregard the current price quotation. He need pay attention to it and act upon it only to the extent that it suits his book, and no more. Thus the investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. That man would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by other persons' mistakes of judgement."

Philip Fisher's Wise Words

"The refusal to sell at a loss, while completely natural and normal, is probably one of the most dangerous in which we can indulge ourselves in the entire investment process.

More money has probably been lost by investors holding a stock they really did not want until they could 'at least come out even' than from any other single reason. If to these actual losses are added the profits that might have been made through the proper reinvestment of these funds if such reinvestment had been made when the mistake was first realized, the cost of self-indulgence becomes truly tremendous."

(Common Stocks and Uncommon Profits)

The Ultimate Hold-versus-Sell Test

Here is the overriding primary test, followed by observations on why it is so critically important:

Knowing all that you now know and expect about the company and its stock (not what you originally believed or hoped at time of purchase), and assuming that you had available capital, and assuming that it would not cause a portfolio imbalance to do so, would you buy this stock today, at today's price?

No equivocation. Yes or no?

Answers such as maybe or probably are not acceptable since they are ways of dodging the issue. No investor probably buys a stock; they either place an order or do not.

Here is the implication of your answer to that critical test: if you did not answer with a clear affirmative, you should sell; only if you said a strong yes, are you justified to hold.

Some thoughts on Analysing Stocks (KISS)

Ideally a stock you plan to purchase should have all of the following charateristics:

• A rising trend of earnings dividends and book value per share.
• A balance sheet with less debt than other companies in its particular industry.
• A P/E ratio no higher than average.
• A dividend yield that suits your particular needs.
• A below-average dividend pay-out ratio.
• A history of earnings and dividends not pockmarked by erratic ups and downs.
• Companies whose ROE is 15 or better.
• A ratio of price to cash flow (P/CF) that is not too high when compared to other stocks in the same industry.

Margin of Safety Concept: Stocks should be bought like groceries, not like perfume

The high CAGR in the early years of the investing period, due to buying at a discount, tended to decline and approach that of the intrinsic EPS GR of the companies over a longer investment time-frame.

Chapter 20 - “Margin of Safety” as the Central Concept of Investment

A single quote by Graham on page 516 struck me:

Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions.

Basically, Graham is saying that most stock investors lose money because they invest in companies that seem good at a particular point in time, but are lacking the fundamentals of a long-lasting stable company.

This seems obvious on the surface, but it’s actually a great argument for thinking more carefully about your individual stock investments. If most of your losses come from buying companies that seem healthy but really aren’t, isn’t that a profound argument for carefully studying any company you might invest in?

Bullbear Buffett

Wednesday, 19 November 2025

Additional notes: a collection of advanced insights and clarifications, focusing on the specific opportunities, pitfalls, and mindset of the enterprising investor.

Elaboration of Section 32

Summary of Section 32

No comments:

All equity security investments present a risk of loss of capital

The Ultimate Hold-versus-Sell Test

Some thoughts on Analysing Stocks (KISS)

Benjamin Graham

Sell the losers, let the winners run.

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Warren Buffett

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