An Investment Framework

An Investment Framework by Peter Lindmark

This is another good article by Peter Lindmark that I would like to share with you. In essence , it said that :

"Investors should develop an investment framework which they make their decisions around. They should have tenets by which they abide in order to avoid permanent impairment of capital, while generating above average returns. Below are ideas from various others frameworks that are useful.
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The best indicator of a good business is a high return on capital; companies with superior returns on invested capital usually enjoy competitive advantages. Look for a margin of safety in the quality of the businesses operations, and businesses with few competitors. Warren Buffett likens a company’s competitive advantage to a moat; look for businesses where that moat is widening. An excellent example is Buffett’s investment in Coca-Cola; they enjoy high returns on invested capital, have one major competitor, and have strong demand due to a low cost product which consumers still purchase in recessions."

"Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily-understandable business whose earnings are virtually certain to be materially higher five, ten and twenty years from now. Over time, you will find only a few companies that meet these standards - so when you see one that qualifies, you should buy a meaningful amount of stock. You must also resist the temptation to stray from your guidelines: If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes. Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also will the portfolio’s market value." – Warren Buffett

Read the full article HERE or http://www.gurufocus.com/news_print.php?id=16848

The Essential Buffett: Timeless Principles for the New Economy

The Warren Buffett Portfolio

Probabilistic Thinking

"Probabilistic Thinking and the 80/20 Rule" by Peter Lindmark

I stumble upon an interesting article with the above title. It said that:

"The human brain is inherently bad at dealing with probabilities. This is largely evident in the field of investing where investors try to handicap companies as potential investments, especially in the face of uncertainty. Investors should strive to improve their cognition of probabilities and operate with a frame of mind that helps to compensate for our wiring at birth. As well, investors need to avoid information overload, a few key variables is all one needs to handicap the odds of an investment’s success or failure."
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"Most investors strive fruitlessly for certainty and precision, avoiding situations in which information is difficult to obtain. Yet high uncertainty is frequently accompanied by low prices. By the time the uncertainty is resolved, prices are likely to have risen. Investors frequently benefit from making investment decisions with less than perfect knowledge and are well rewarded for bearing the risk of uncertainty. The time other investors spend delving into the last unanswered detail may cost them the chance to buy in at prices so low that they offer a margin of safety despite the incomplete information." Margin of Safety, Seth Klarman"

Read the full article HERE or http://www.gurufocus.com/news.php?id=13090

In an Uncertain World: Tough Choices from Wall Street to Washington

Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets

Understanding and Calculating the Odds: Probability Theory Basics and Calculus Guide for Beginners, with Applications in Games of Chance and Everyday Life

Is It Still A Good Time To Buy Gold ?

I attended a talk on the prospect of gold investment on Monday. The speaker gave a brief summary of the fundamentals of gold investment.

According to him, gold price started its uptrend from 2001 and had since up for 6 years. The reason for this is that while the supply side of gold has doubled but the demand side has gone up 4 times ! It is also not foreseeable to have new supply coming on stream in the next 3 to 5 years as any new found mines would take 7 to 10 years before the new supply can come on stream to the market. Therefore, the demand shall far outstrip the supply, leading to the further upside potential.

The other reason for the pent up demand is due to the fact that about 50% of the global gold supplies are used in jewelry. India, China, Arabia, UAE, Turkey and Egypt accounted for 50% of the jewelry market. As many of these countries are having strong economic growth for the past many years, with their strong purchasing power, the probability of the further rise in demand for gold jewelry shall continue.

Other reason for this trend are the weakening of US dollar and the new record highs of oil prices. With higher inflation, gold is a good hedge against inflation.

When he was asked on what would be his prediction of the gold price might hit ? He answered that no one could be 100% sure in investment arena and put up his usual legal disclaimer on screen.

You may also want to read this free article with the title "Go For Gold"


Legal Disclaimer: The above posting is strictly for information and educational purpose only. You are advised to carry out your own due diligence and check with your licensed broker, investment adviser or financial adviser before making any investment decisions.

Warren Buffett MBA Talk

This 1 hour 28 min video shows Warren Buffett's talk at University of Florida. It is time worthwhile spent on learning from the horse mouth since Warren Buffett never writes a book on his investment thoughts. This video together with his annual letter to shareholders of Berkshire Hathaway are the best sources of his investment thoughts.

Visit: http://quantuminvestinglife.blogspot.com/ for more.

Letter To Shareholders

Every year, Warren Buffett communicates with shareholders of Berkshire Hathaway by writing to them in a letter. The list of the letters for the past years is available at "Useful Link" of this blog : http:quantuminvestinglife.blogspot.com/

The letter gives insights to his investment philosophy and investors can gain much by reading and studying his annual letter to shareholders. This is the best education you can get than any other sources.

Warren Buffett's Grade Versus Other Gurus Grades

I stumble upon this site which gives valuable information on the Gurus forecasting grades. You can check this out HERE. Compare their grades versus Warren Buffett's grade HERE.

What Is Your Expectation of Investment Returns ?

The cover story in the August 6, 2007, issue of U.S. News & World Report featured Warren Buffett, the second-wealthiest person in the United States and perhaps the world's most famous investor. The headline read "How to Make Money the Buffett Way."
Visit :http://quantuminvestinglife.blogspot.com/ for more...