Buffett: A great company has a high return on tangible asset and is growing.

 

Here is a detailed summary of the video transcript from 0:00 to 5:47, broken down by topic.

Opening: The Car Dealership Announcement (0:00–0:26)

The speaker (Warren Buffett) starts by referencing a recent announcement: Berkshire Hathaway is buying Van Tuyl Group, the fifth largest auto dealership network in the U.S. He acknowledges that some people view the car business as "ethically challenged" but asks Buffett to explain what makes a business "good" by his standards, and why car dealerships fit that description.

Buffett’s Definition of a Good Business (0:26–1:28)

• Core trait: A good business earns a high rate of return on tangible assets.

• Best case: Businesses that earn a high return on tangible assets and grow.

• Still good: Even businesses that don't grow can be good investments if they earn a high return on tangible assets and you don't overpay.

• Key warning: Paying too much turns a good business into a bad investment. Paying an appropriate price allows you to do "all right."

• Past mistake: Buffett admits that for 20–30 years, he tried buying bad businesses at very cheap prices — and eventually learned that was a bad idea.

Why Car Dealerships Are a Good Business (1:28–2:33)

• Low capital requirements:

  • No significant receivables.

  • Inventory is financed (floor planning).

  • Real estate can be leased (though Berkshire owns 95% of theirs).

• High volume, narrow margins, high return on capital: Van Tuyl has 78 dealerships averaging over $100 million each in revenue. You can operate on thin margins but still achieve a high return on capital because very little capital is tied up in the business.

• Industry consolidation: There are over 17,000 car dealerships in the U.S. today, down from ~30,000 40–50 years ago. The average dealer does far more volume than in the past.

Big Banks: Are They Still a Good Business? (2:33–4:09)

• Are banks as good as they were a few years ago? No.

• Why the change: Banks earn on assets, not net worth. Regulations have changed to require more net worth per dollar of assets. If you earn the same amount on assets but have more net worth, your return on net worth goes down.

• Past profitability: 10–15 years ago, the better banks were "ungodly profitable" because they had very high asset-to-net-worth ratios. Some even cheated with off-balance-sheet vehicles (e.g., Citigroup) to control more assets.

• Now: Those practices are terminated. Limits on asset-to-net-worth ratios are much lower. Bigger banks have even lower allowed ratios.

• Conclusion: What was a "very profitable" business has been downgraded to a "good business" — if executed well.

How Banks Make Money & Their Fatal Flaw (4:09–5:47)

• Simple business model: Get money very cheap. Wells Fargo has roughly $1 trillion in deposits costing about 10 basis points (0.1%).

• Where banks get in trouble: Never on the liability side (deposits) or expense side — always on the asset side (what they lend/invest in).

• The core danger: Banks go "crazy" by copying what their dumb competitors are doing. This happens in every business but is "particularly virulent" in banking.

• John Stumpf quote (former Wells Fargo CEO): "I don't know why we keep looking for new ways to lose money when the old ones were working so well."

• Buffett's management rule: If someone says "we should do this because the other guy is doing it," he tells them to go back to square one.

• Anecdote: At a director's meeting, a well-known property-casualty insurance manager was trying to justify buying a life insurance company with weak reasons. When the audience wasn't convinced, he finally said, "All the other kids have one" — a common, flawed rationale for business decisions.

This is a solid, time-tested value investing checklist suitable for long-term investors seeking to build wealth steadily while avoiding big mistakes.

 

This chart outlines Terry Smith's investing philosophy, as summarized by Brian Feroldi. Smith is a well-known value-oriented fund manager (Fundsmith), and his principles emphasize quality, patience, and discipline. Below is a breakdown and analysis of each section:

---

1. The Rule of 3

• Buy Good Companies – Focus on quality businesses with durable competitive advantages.

• Don’t Overpay – Even great companies can be bad investments if bought at too high a price.

• Do Nothing – Avoid overtrading; let compounding work over time.

Comment:
This is a distilled version of Warren Buffett’s philosophy: buy wonderful businesses at fair prices and hold them. “Do nothing” is especially important—many investors hurt returns by over-trading.

---

2. Disqualifying Features

• Start by eliminating bad companies rather than searching for good ones.

• Reduces the risk of catastrophic losses.

Comment:
This is a practical risk-management tool. By filtering out companies with poor economics, high debt, or dubious governance first, you save time and avoid “value traps.”

---

3. High Returns on Capital

• ROIC (Return on Invested Capital) is a key metric for quality.

• Formula:

  $$ROIC=\frac{\text{Net Operating Profit After Tax}}{\text{Invested Capital}}$$

Comment:
ROIC measures how efficiently a company uses its capital. Consistently high ROIC often indicates a moat and competent management. Terry Smith heavily emphasizes this in his stock selection.

---

4. Look for High FCF Yields

• Free Cash Flow Yield compares FCF to the company’s market value.

• Formula:

  $$\text{FCF Yield}=\frac{\text{Free Cash Flow}}{\text{Market Value of the Company}}$$

• Compare to “3% over expected inflation” as a hurdle rate.

Comment:
FCF is harder to manipulate than earnings. A high FCF yield can signal undervaluation, but it must be considered alongside business quality—a declining business may have a high but unsustainable yield.

---

5. Create a Watchlist

• Track companies that are good but not cheap enough.

• Use price targets to wait for the right entry point.

Comment:
This encourages patience and preparedness. Many investors miss opportunities because they don’t track companies systematically over time.

---

6. Exploit Advantages of Being an Individual Investor

• Play the long game – no quarterly performance pressure.

• Buy unloved stocks or industries – contrarian opportunities.

• Invest anti-cyclically – go against market sentiment.

Comment:
This section is crucial. Individual investors can be more flexible and patient than institutions. They can exploit market inefficiencies in neglected areas without size constraints.

---

Overall Commentary:

Strengths:

• The framework is simple, disciplined, and focused on quality and value.

• Emphasizes psychological and behavioral edges (patience, contrarianism).

• Uses few but powerful metrics (ROIC, FCF yield).

Potential Limitations:

• Requires deep business analysis and patience—not suitable for short-term traders.

• “Don’t overpay” is subjective; determining intrinsic value is challenging.

• Anti-cyclical investing demands strong conviction and can involve long periods of underperformance.

Verdict:
This is a solid, time-tested value investing checklist suitable for long-term investors seeking to build wealth steadily while avoiding big mistakes. It aligns closely with the philosophies of Buffett, Munger, and other quality-focused investors. The emphasis on eliminating bad ideas and waiting for the right pitch is especially valuable in today’s noisy markets.

Recognise the phenomenal long-term wealth-creating power of a company that possesses a durable competitive advantage over its competitors.

History of investment analysis

Benjamin Graham

Benjamin Graham had adopted early bond analysis techniques to common stocks analysis.

He focused primarily on determining a company's solvency and earning power for the purposes of bond analysis.  

Graham never made the distinction between a company that held a long-term competitive advantage over its competitors and one that didn't.

He was only interested in whether or not the company had sufficient earning power to get it out of the economic trouble that sent its stock price spiraling downward.  

He wasn't interested in owning a position in a company for ten or twenty years.  If it didn't move after two years, he was out of it.

Warren Buffett

Warren Buffett discovered, after starting his career with Graham,  the tremendous wealth-creating economics of a company that possessed a long-term competitive advantage over its competitors.

He realized that the longer you held one of these fantastic businesses, the richer it made you.

While Graham would have argued that these super businesses were overpriced, Warren realized that he didn't have to wait for the stock market to serve up a bargain price, that even if he paid a fair price, he could still get superrich off of those businesses.

Warren developed a unique set of analytical tools to help identify these special kinds of businesses.  

His new ways of looking at things enabled him to determine whether the company could survive its current problems (recall Washington Post at the time when he first bought into this company).

Warren's way also told him whether or not the company in question possessed a long-term competitive advantage that would make him superrich over the long run.  

Warren's two simple and stunning revelations:  

(1) How to identify an exceptional company with a durable competitive advantage?

(2) How to value a company with a durable competitive advantage?

Warren Buffett says Berkshire is reversing course on airlines – again

Mon, 4 May 2020

Berkshire Hathaway's 2020 Shareholder Meeting


The billionaire investor said Berkshire Hathaway Inc completely exited its stakes in the four major US airlines. The sales of shares of Delta Air Lines Inc, Southwest Airlines Co, American Airlines Group Inc and United Airlines Holdings Inc made up most of the company’s US$6.5bil in equity sales in April.

During his live-streamed annual meeting, Buffett said the business has fundamentally changed following the economic fallout from the coronavirus pandemic. He declined to blame the performance of the airline executives, saying they’ve done a good job of raising money to get through the crisis.

“The world changed for airlines and I wish them well, ” Buffett said Saturday. He clarified that he made the decision and that he lost money on his investments. “That was my mistake.”

Buffett’s had a complicated relationship with the airline industry over the years. After a troublesome investment in USAir, Buffett joked that he would call an 800 number to declare he was an “air-o-holic” if he ever got the urge to invest in airlines again.

Then in 2016, Berkshire dove into the industry again, amassing stakes in the four largest US airlines. At the end of 2019, those stakes amounted to almost US$10bil. Buffett’s renewed faith in the industry prompted speculation that he might one day own one of the carriers.

But now, he’s cut those investments again. Berkshire disclosed in April that it had at least trimmed its Delta and Southwest stakes, both of which had previously been above a 10% ownership level.

“The airline business - and I may be wrong and I hope I’m wrong - but I think it’s changed in a very major way, ” Buffett said. “The future is much less clear to me.”

The disclosure was among the most significant at the annual meeting, which was notable for its different feel this year as the event that usually draws tens of thousands was done was hosted virtually.

Buffett, 89, shared the stage with a top deputy, Greg Abel, who runs Berkshire’s non-insurance operating units. Vice-chairman Charlie Munger, 96, didn’t join, though Buffett said his long-time business partner was in good health.

Buffett said he didn’t know how consumer travel habits will change after the pandemic subsides, but any reduction in travel could leave airlines with higher-than-necessary fixed costs. Any impact could filter down to suppliers like Boeing Co.

- Bloomberg

Fed Chairman Powell Belongs 'On a Pedestal'

"I always had Paul Volcker on a pedestal in terms of Fed chairmen," Buffett said. "[Current Fed Chairman] Jay Powell, in my view, belongs with him on that pedestal," he added. "They [the Fed] acted with unprecedented speed and determination" to prop up the economy in the wake of COVID-19 crisis. Regarding the massive expansion of the Fed's balance sheet, he said, "We don't know the consequences of doing that, but we do know the consequences of doing nothing, and we owe the Fed a great thank you."

Among the various initiatives launched by the Fed to prop up the U.S. economy in the midst of the crisis are:

• Primary Market Corporate Credit Facility (PMCCF)
• Secondary Market Corporate Credit Facility (SMCCF)
• Commercial Paper Funding Facility (CPFF)
• Money Market Mutual Fund Liquidity Facility
• Paycheck Protection Program Liquidity Facility (PPPLF)
• Main Street Lending Program
• Municipal Liquidity Facility (MLF)

 

Later, in response to a shareholder question about whether Berkshire is considering lending out its large and growing cash hoard, Buffett said: "This is a great time to borrow money. It may not be a good time to lend money." Noting that corporate debt issuance has proceeded at a record pace as the Fed has provided liquidity, he asserted, "We are not in the business of subsidizing companies with [our] shareholder money."


https://www.investopedia.com/5-takeaways-from-the-2020-berkshire-hathaway-annual-meeting-4843875

Buffett admits a mistake with airline stocks

There's been a lot of speculation about the moves that Berkshire Hathaway has recently made with its airline stock holdings. In early April, Berkshire sold substantial amounts of its holdings in Delta Air Lines (NYSE:DAL) and Southwest Airlines (NYSE:LUV), with disclosures necessary because of Berkshire's having held more than 10% of the two airlines' outstanding shares. At the time, it seemed as though Buffett might simply be reducing its positions below 10% to avoid future complications.

However, Buffett reported selling a total of $6.5 billion in stock during April, far more than the Delta and Southwest sales that had been reported and also including shares of United Airlines Holdings (NASDAQ:UAL) and American Airlines Group (NASDAQ:AAL) as well. Questioned later, the Berkshire CEO said that the company sold off its entire positions in the four airlines. As he explained it, he "just decided I made a mistake." He had initially figured that investing $7 billion to $8 billion to buy 10% stakes in the four biggest U.S. airlines would give him about $1 billion in underlying earnings, which seemed like a reasonable value. However, Buffett said, "It turned out I was wrong about the business."

Buffett didn't blame airline CEOs, who managed their companies well and did a lot of things right. However, the Berkshire leader no longer feels comfortable that airlines will ever recover to their pre-coronavirus levels, and even two to three years from now, it's possible that not nearly as many people will be flying. Unfortunately, even if airlines recover 70% to 80% of their pre-crisis passenger loads, they'll still have far too many planes. With airlines selling stock to raise capital, upside is limited. Buffett concluded, "The world changed for airlines, and we wish them well."

https://www.fool.com/investing/2020/05/02/what-warren-buffett-said-at-berkshires-2020-shareh.aspx





Related article:

Warren Buffett Adds to Delta Investment as Airlines Plunge to Value Territory

https://myinvestingnotes.blogspot.com/2020/03/warren-buffett-adds-to-delta-investment.html

Berkshire's Top Equity Holdings

Berkshire still holds3 over $180 billion in the common stock of many publicly-traded companies. Approximately 69% of the aggregate fair value was concentrated in these five companies:

• American Express Co. (AXP): $13.0 billion
• Apple Inc. (AAPL): $63.8 billion
• Bank of America Corp. (BAC): $20.2 billion
• The Coca-Cola Company (KO): $17.7 billion
• Wells Fargo & Co. (WFC): $9.9 billion

Warren Buffett Adds to Delta Investment as Airlines Plunge to Value Territory

Coronavirus fears have taken their toll, providing an opportunity for investors

March 03, 2020

As fears of the new coronavirus mount, the share prices of airlines have taken a hit. Taking advantage of this dip into value territory, famous value investor Warren Buffett (Trades, Portfolio) recently disclosed that Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) has invested an additional $45.3 million in Delta Air Lines Inc. (NYSE:DAL).



According to GuruFocus Real-Time Picks, a Premium feature, Buffett bought 976,507 more shares of the airline on Feb. 27, increasing his stake by 1.38% to a total of 71,886,963 shares. The stock was trading around $46.40 at the time.

DAL 30-Year Financial Data
The intrinsic value of DAL
Peter Lynch Chart of DAL






Buffett added to the Delta position toward the end of a week-long U.S. market selloff, which was brought on by fears that the new coronavirus would slow economic growth worldwide. In a whiplash correction, the S&P 500 dropped 13.9% in one week, and the biggest stock fund in the world, the SPDR S&P 500 ETF Trust (SPY), saw over $13 billion in outflows.





The last time Delta traded at such a low price was in early January of 2019. While the stock price is around the same as what it was a year ago, the company’s earnings have increased since then, making it undervalued according to the Peter Lynch chart.



Beginning in January, the U.S. posed travel restrictions on entry from China, which mainly consisted of rerouting airline passengers to certain airports to be screened for the virus. In February, additional travel restrictions were implemented on passengers travelling to the U.S. from Italy, South Korea and Iran, which have also seen significant coronavirus outbreaks.

Aside from government-imposed travel restrictions, there has also been a general drop in demand for international flights as people seek to reduce their exposure to foreign countries and crowded spaces. On Saturday, American Airlines (NASDAQ:AAL) announced it would be suspending flights to and from Milan, Italy from some of its airports, a decision that is due purely to lack of consumer demand.

Decline in demand for luxury services such as airline flights are nothing new during a market downturn. While it’s true that in this particular case, the problem is greatly exacerbated by the fact the recession is the result of an epidemic, demand will pick back up again at some point. Once panic over the new coronavirus recedes, the profits and stock prices of airline companies will rise again.

At a price-earnings ratio of 6.48 as of March 3, Delta is trading at a three-year low point in its valuation. Even if its revenue falls over the next few quarters, the current price is still more attractive than it was a few months ago in regard to the company’s future prospects.

Year to date, Delta shares are down 18.67%, while American Airlines shares are down 33.86%, Southwest Airlines (NYSE:LUV) shares are down 13.02% and United Airlines (NASDAQ:UAL) shares are down 30.46%. However, Buffett also owns shares of all four airlines, indicating a confident long-term bet in the profitability of the industry.


Margaret Moran

https://www.gurufocus.com/news/1064213/warren-buffett-adds-to-delta-investment-as-airlines-plunge-to-value-territory

Here’s the real reason Warren Buffett is sitting on a record $128 billion in cash, according to one strategist

Published: Mar 2, 2020 1:31 p.m. ET

Warren Buffett, ever the beacon of market optimism, appears to be positively bullish about where stocks are headed from here.

The Berkshire Hathaway BRK.A, -3.26% boss made that clear in his annual letter to shareholders in which he wrote of the “American Tailwind” and made the case for staying invested in stocks.

“If something close to current rates should prevail over the coming decades and if corporate tax rates also remain near the low level businesses now enjoy, it is almost certain that equities will over time perform far better than long-term, fixed-rate debt instruments,” Buffett said in the letter.

But this chart of Buffett’s record cash pile, courtesy of RIA Advisors strategist Lance Roberts, seems to tell a different story — one in which what Buffett is saying looks a whole lot different from what Buffett is actually doing:




“As the old saying goes: ‘Follow the money,’” Roberts wrote in a post on his Real Investment Advice blog. “If he thinks stocks will outperform bonds why is holding $128 billion in short-term bonds?”

While the obvious take is that Buffett is just waiting for a good deal to come along so he can snap it up, another is that he’s not as optimistic as he lets on. Maybe, as Roberts suggests, the answer actually lies in a pair of charts.


This one takes a look at the Shiller price-to-earnings ratio, which is currently around 30x, to project 10-year total returns using history as a guide:



As you can see, a lot of red ink has spilled in the years following valuations like the one we’re currently seeing in the stock market.

Here’s another way to look at it, using the “Buffett Indicator”:




Just look at what happened the last few times Buffett’s favorite valuation measure was elevated. Again, forward return expectations, as several indicators clearly show, are markedly lower over the following 10 years.

Roberts says investors might want to exercise some caution before they follow Buffett’s “do as I say, not as I do” advice and buy and hold index funds.

“Buffett did not amass his fortune by following the herd but by leading it,” Roberts wrote. “He is sitting on a $128 billion in cash for a reason. Buffett is fully aware of the gains he has forgone, yet still continues his ways. Buffet is not dumb!”

Sitting on cash, for the first time in awhile, was not the place to be in Monday’s session as the Dow DJIA, -2.94% , S&P SPX, -2.81% and Nasdaq COMP, -2.99% were all staging strong rebounds.


https://www.marketwatch.com/story/heres-the-real-reason-warren-buffett-is-sitting-on-a-record-128-billion-in-cash-according-to-one-strategist-2020-03-02?fbclid=IwAR1WhwQ03BmZ49y4Uw1qDww03MApd5mz4anVVLCYOG35X7vdHcL-nduryls

The Investment shown by the DCF calculation to be the cheapest is the one that the investor should purchase.

How does Buffett value his companies?

For Buffett, determining a company's value is easy as long as you plug in the right variables: 

• the stream of cash and 
• the proper discount rate.

If he is unable to project with confidence what the future cash flows of a business will be, he will not attempt to value the company  This is the distinction of his approach.



Critics of Buffett's DCF valuation method.

Despite Buffett's claims, critics argue that estimating future cash flow is tricky, and selecting the proper discount rate can leave room for substantial errors in valuation.

Instead these critics have employed various shorthand methods to identify value:

• low price-to-earnings ratios, 
• price-to-book values and 
• high dividend yields.  

Practitioners have vigorously back tested these ratios and concluded that success can be had by isolating and purchasing companies that possess exactly these financial ratios.




Value investors versus Growth investors

People who consistently purchase companies that exhibit low price-to-earnings, low price-to-book, and high dividend yields are customarily called "value investors."

People who claim to have identified value by selecting companies with above-average growth in earnings are called "growth investors."  Typically, growth companies possess high price-to-earnings ratios and low dividend yields.  These financial traits are the exact opposite of what value investors look for in a company.



Growth and Value investing are joined at the hip.

Investors who seek to purchase value often must choose between the value and growth approach to selecting stocks.

Buffett admits that years ago, he participated in this intellectual tug-of-war.  Today he thinks the debate between these two schools of thought is nonsense.  

Growth and value investing are joined at the hip, says Buffett.

Value is the discounted present value of an investment's future cash flow; growth is simply a calculation used to determine value.




Growth can be add to and also can destroy value.

Growth in sales, earnings, and assets can either add or detract from an investment's value.

Growth can add to the value when the return on invested capital is above average, thereby assuring that when a dollar is being invested in the company, at least a dollar of market value is being created.
However, growth for a business earning low returns on capital can be detrimental to shareholders.

For example, the airline business has been a story of incredible growth, but its inability to earn decent returns on capital have left most owners off theses companies in a  poor position.



Which valuation method(s) to use?  Which stock to buy?

All the shorthand methods - high or low price-earnings ratios, price-to-book ratios, and dividend yields, in any number of combinations - fall short, Buffett says, in determining whether "an investor is indeed buying something for what it is worth and is therefore truly operating on the principle of obtaining value for his investments.............Irrespective of whether a business:

• grows or doesn't,
• displays volatility or smoothness in earnings , 
• or carries a high price or low in relation to its current earnings and book value, 

the investment shown by the discounted -flows-of-cash calculation to be the cheapest is the one that the investor should purchase.

Deep Value Investing has its Inherent Problems.

Buffett said it best:

Unless you are a liquidator, that kind of approach to buying businesses is foolish.

• First, the original 'bargain' price probably will not turn out to be such a steal after all. In a difficult business, no sooner is one problem solved than another surfaces - never is there just one cockroach in the kitchen. 
• Second, any initial advantage you secure will be quickly eroded by the low return that the business earns ...

There are better ways to make money (see below).


Warren Buffett, Berkshire Hathaway shareholder letter, 1989.
http://www.berkshirehathaway.com/letters/1989.html





When the overall market valuation is high, and everything else is rising, those dropping and appearing in the deep-bargain screener probably deserved to be traded by low valuations.

• Their stock prices were likely low for the right reasons, and buying these would likely have resulted in deep losses.
• Therefore, when it comes to deep-value investing, investors need to be cautious and aware of this approach's inherent problems.

The inherent problems with deep value investing

"Cigar-butt investing"

This was coined by Buffett for the strategy of buying mediocre businesses at prices that are much lower than the companies' net asset values.

He said the approach is like "a cigar butt found on the street that has only one puff left in it and may not offer much of a smoke, but the "bargain purchase" will make that puff all profit."




There are several problems with this approach.

1. Erosion of value over time.

Mediocre businesses do not create value for their shareholders; instead, they destroy business value over time.

The value of the business can decline and the initial margin of safety may gradually shrink, even if the stock price doesn't go up.

Investors need to be lucky enough to have the stock prices rise in time and sell before prices drop again following the intrinsic value of the business.

"Time is the friend of the wonderful business, the enemy of the mediocre." Buffett wrote in his 1989 shareholder letter.


2. Timing and Pain

Buy these bargain portfolios when you can find plenty of them, but if the broad market is in quick decline, like in 2008, the bargain portfolio will be very likely to lose much more than the general market.

• If the decline lasts longer, many of the companies in the portfolio may suffer steeper operating losses and may even go out of business.
• It is much more painful to hold such a portfolio in bad times, as anyone who owns these stocks during bear markets or recessions will attest - and lose much sleep over.

Because of the quick erosion of business value, selling the deep-asset bargains quickly is key, even if stock prices do not appreciate. The biggest profits are usually achieved within the first 12 months.

"If you buy something because it is undervalued, then you have to think about selling it when it approaches your calculation of its intrinsic value. That's hard." (Charlie Munger.)

Buffett likens buying mediocre businesses at deep bargain prices for a quick profit to dating without the intent of getting married. In that situation, it is essential to end the courtship at the right time and before the relationship turns sour.


3. Not Enough Stocks Qualify

To avoid errors and disasters caused by single stocks in the deep-bargain portfolio, it is important to have a diversified group of them.

But when the market valuation is high, it is just not possible to find enough stocks to satisfy the diversification requirement. They simply dried up as the market continued to tick higher.

This situation may last a long time, as the close-to-zero interest rate has lifted the valuations of all assets.


4. Tax Inefficiency

Because of the short holding time, any gain from the portfolio is subject to the same tax rate as the investor's income tax (for U.S. investors, unless it is in a retirement account.)

This drastically reduces the overall return over the long term.




If buying mediocre businesses at deep bargain prices for a quick profit is like a date without the intent of getting married, buying them and getting involved long term is like a marriage without love. A lot of other things need to be right to work things out, and it will never be a happy marriage.




Important Notes on Deep-Asset Bargains strategy


Though buying deep-asset bargains can be very profitable, this strategy comes with its inherent problems.

- This strategy comes with a much higher mental cost to investors.

- More importantly, business deterioration and the erosion of value put investors in a riskier position.

- As a result, they need to strictly follow the rules of maintaining a diversified portfolio and selling within 12 months whether investments worked out or not.




Ask yourself:

Why would you, as an investor, want to get involved in this mess (a deep-asset-bargain) and witness things deteriorating, hoping the situation will improve?

Even if it works out eventually, which is very unlikely (in the majority), the mental and psychological drain is simply not worth it.



There are better ways to make money.

Buy Only Good Companies!


"Bargain-purchase folly."


Instead of buying companies with deteriorating values on the cheap and hoping things will improve, why not buy companies that grow value over time?

Warren Buffett summarized in a single sentence the priceless lessons he learned from his personal "bargain-purchase folly".

"It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price."