Category Warren Buffett

Tobin’s Q-Ratio Trades at Historical Highs

By just about any intrinsic measure - the stock market looks expensive. Ben Graham would be warning investors to heed caution. Now one of the more widely cited metrics is its forward price-to-earnings (PE) ratio - which trades at a very high 22x. However, another intrinsic measure is James Tobin's Q-Ratio - which now trades at a record high - exceeding that of the dot.com bust. And whilst not a great timing tool - it maintains a very reliable record of picking long-term secular highs.

Benjamin Graham’s ‘The Intelligent Investor’

Over the 14 years writing this blog - I've mentored many people on how to become a better investor. It's something I enjoy and a large part of why I've written this blog for so long. As part of that, one of the (many) books I highly recommend is Benjamin Graham's timeless classic "The Intelligent Investor". Unfortunately this is not a great book for those beginning their investing career. It's very dense and requires a lot of time and focus. I had the idea to write a 20-part summary of the book -- where each part corresponds to a chapter. And where practical - I produced up-to-date examples of his principles - simply to illustrate that nothing changes. And whilst someone will always say "it's different this time" - the truth is very rarely is it different.

Time to be Greedy or Fearful?

Warren Buffett is famous for saying "be fearful when others are greedy; and be greedy when they are fearful". Today the Oracle of Omaha sits on a record $325B in cash - a record for Buffett - and over 30% of his entire portfolio. Investor enthusiasm today is wildly optimistic about future growth and earnings post the election result. And whilst surging prices are a sign of confidence - markets are also notoriously fickle...

Decoding the Drop in Oil

Middle East tensions are rising. However, oil prices are dropping. Why? The Israeli missile attacks on Iran, while not entirely unforeseen, triggered a negative response in the oil market. Now this may seem curious... contrary to expectations of a price surge due to heightened geopolitical tensions, crude oil prices plunged ~5%. In short, market sentiment tends to prioritize economic supply and demand concerns over (short-term) geopolitical risks

Why Buffett’s Mentor Would Reduce Risk

I've been re-reading "The Intelligent Investor" by Benjamin Graham. Warren Buffett called it "by far the best book on investing ever written" - crediting Graham with laying the foundation for his entire investment philosophy. The book taught me three powerful lessons: (1) above all else, investing is about protecting your capital; (2) investors should strive to pursue adequate and sustainable gains; and (3) it requires overcoming self-defeating behaviors (e.g., fear, greed and bias). The lessons could not be more timely given today's excessive valuations.

Buying is Easy… Selling is Hard

Do you consider yourself a "good" or "bad" investor? For example, one might say a good investor is someone who beats the returns of the Index over a long period (10.5% annualized). Beating the Index over the long-run is difficult to do... very few fund managers are able to do it. But what if I framed the question this way: (i) bad investors think of ways to make money; vs (ii) good investors think of ways not to lose money. Which one best summarizes your approach to speculation? Of the several thousand posts I've written the past 13+ years - this is arguably the most important question you could ask. If you understand the gravity of this distinction... you have a good chance of succeeding.

Apple: Ready to Take Another Bite?

Apple is ~15% off its all time high as it lags its large cap peers. Concerns of iPhone growth and China have rattled investors. However, it's not unusual for this stock to pull back. Since 2107, we have seen 11 retraces - offering patient investors buying opportunity. From my lens, Apple is a reasonable long-term buy around $165. And if you can get it cheaper - add to it. Over the next 3 years - I think it will be well over $200 as earnings top $8.00 per share.

Buffett’s Letter: Time Not to be Greedy

If we needed confirmation the market isn't cheap - the Oracle of Omaha told us as much in his annual letter to shareholders. He sits on a record amount of cash - over $167B. But he is no hurry to overpay. Buffett's letter is compulsory reading for anyone who is serious about investment. It's filled with timeliness insights from the mind of one of the world's greatest investors (arguably the greatest). For example, very few (if any?) have averaged a CAGR of 19.8% for 58 years (see page 17) vs the S&P 500 10.2%