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

QMV worksheet (Page 1 - Quality & Management, Page 2 - Valuation).

Elaboration of Section 22

This section presents the practical tool that operationalizes the entire QMV (Quality, Management, Valuation) philosophy discussed in previous sections. It consists of a two-page worksheet that guides an investor, step-by-step, through the complete analysis of a stock, transforming abstract principles into a concrete, data-driven decision.

The worksheet is the culmination of the "intelligent effort" required of an enterprising investor.

Page 1: The Quality & Management Screen (The "Gatekeeper")
This page is the critical first filter. Its purpose is to answer the question: "Is this a good enough business to own?" If a company fails this page, the analysis stops, and the investor moves on. There is no point in valuing a poor business.

The worksheet breaks this down into quantifiable checks, likely including:

Quality of Growth:
- Sales (Revenue) Growth: Is it consistent and above a minimum threshold (e.g., >10% per year)?
- Earnings Per Share (EPS) Growth: Is it consistent and preferably in line with or exceeding sales growth?
- Pre-Tax Profit Margins: Are they high and stable or improving? This indicates pricing power and cost control.
- Return on Equity (ROE): Is it consistently high (e.g., >15%)? This is a key metric for assessing a durable competitive advantage.
Quality of Management:
- Financial Leverage (Debt): Is the company's debt level manageable? A low debt-to-equity ratio is preferred.
- Earnings Stability: Does the company have a predictable earnings stream, or is it highly cyclical and erratic?
- Dividend History: Has the company consistently paid and grown its dividend? This signals financial health and a shareholder-friendly policy.

Only if the company scores highly on Page 1 does the investor proceed to Page 2.

Page 2: The Valuation Screen (The "Price Check")
This page answers the question: "What is a sensible price to pay for this wonderful business?" It implements the detailed five-step process from Section 19.

The worksheet provides a structured template to calculate:

Projected High and Low EPS: Using conservative growth assumptions.
Historical Average, High, and Low P/E Ratios: Based on 5-10 years of data.
Forecasted High and Low Prices: By combining the projected EPS with the historical P/Es.
Upside/Downside (Reward/Risk) Ratio: Comparing the forecasted prices to the current market price to determine the Margin of Safety. The goal is a ratio of 3-to-1 or better.
Potential Total Return: Calculating the estimated average annual return including both capital appreciation and dividends.

The Power of the Tool
The worksheet's design, with data boxes highlighted in yellow, shows that once the core financial data is input, the rest of the analysis (the calculations) is automated. This ensures objectivity and discipline, preventing emotions from influencing the final buy/sell/hold decision. It also raises the question of whether a software tool could be developed to streamline this process further.

Summary of Section 22

Section 22 provides the essential, practical tool—a two-page QMV worksheet—that encapsulates the entire intelligent investing process, forcing a disciplined, sequential evaluation of a company's quality and its price.

Page 1 (Quality & Management): Acts as a qualitative and financial gatekeeper. It rigorously checks for consistent growth, high profitability, and sound management. A failure here ends the analysis.
Page 2 (Valuation): Acts as a quantitative price calculator. It determines the stock's intrinsic value range, calculates the margin of safety (reward/risk ratio), and estimates the potential return to see if it meets the investor's objectives.

In essence, this worksheet is the bridge between theory and practice. It is the checklist that ensures an investor never buys a poor business and never overpays for a good one. By using this tool, the investor systematically applies the wisdom of Graham, Lynch, and Buffett, making the process of selecting wonderful companies at wonderful prices a repeatable and disciplined exercise.

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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

QMV worksheet (Page 1 - Quality & Management, Page 2 - Valuation).

Elaboration of Section 22

Summary of Section 22

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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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