23; Buffet considers the following very important: return on equity, changes in operating margins, debt levels, capital expenditure needs, and cash flow. He determines the value of a company by totaling the net cash flows he expects to occur over the life of the company, discounted at the appropriate interest rate (Buffet uses 30 year bond rates), and possibly a premium based on the risk being taken. He prefers to hold a few great stocks rather than many good stocks. He thinks most investors misunderstand the nature of risk and the need for diversification. With these strategy tips for investing you can decide whether or not you want to incorporate these into your own strategy or not to at all. All of these tips can be useful in evaluating a stock, but remember this is Warren’s strategy. An example is his belief of not investing in companies that he doesn’t know about. One of these sectors has been technology stocks. He missed out on the Microsoft wave with only a 100 shares bought in the beginning, but that doesn’t mean he’s a bad investor, it simply means that he sticks to his strategy and that may be the real key to his investing success. ...
