Invest Like a Guru
Invest Like a Guru

Invest Like a Guru

discusses all the speculative bubbles since the early 1600s. He argues that financial memory is “notoriously short” and defines bubbles as created by human speculation when there is something new and there is an abundant amount of money from leverage. (Location 351)

A company's debt level is the most important factor when measuring its financial strength. (Location 538)

Consider Research-In-Motion, now BlackBerry, which had nearly 50 percent of the smartphone market in the United States in 2008: A few wrong product decisions and slow moves wiped out almost all of its market share. It took more than a genius to compete against companies like Apple and Google, which are run by geniuses, too. Another type of business that any idiot can run is the kind where strong competitive (Location 751)

Therefore, if everything else is equal, buy the company that can grow by copying what it is doing in more places, or buy the ones that are protected from competition by their strong competitive advantages. (Location 767)

Diversification is protection against ignorance. It makes little sense if you know what you are doing…. Wide diversification is only required when investors do not understand what they are doing. (Location 948)

The core investing philosophy of Yacktman is viewing stocks as bonds, which means thinking in terms of the rate of return from the stock, just like with bonds. The key points of his strategy are related to the business type, the management, and the investment hurdle. (Location 1011)

But he goes into more detail and says to invest only in good businesses that are not cyclical and to invest only in companies whose products have a short customer repurchase cycle and long product cycles. (Location 1016)

Mediocre businesses do not create value for their shareholders; instead, they destroy business value over time. (Location 1426)

“It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” (Location 1575)

So, as investors, we should focus on these value escalators and buy only good companies! (Location 1589)

will be worth more tomorrow than it is today. As opposed to mediocre businesses that erode value over time, a good business can grow its value and do (Location 1595)

Unlike buying mediocre businesses, where investors are forced to sell if the price is getting close to the value and they need to sell before the value erosion hurts the stock price, you only need to buy the stock at a reasonable price, and you don't have to worry about selling. (Location 1616)

Therefore, to determine whether a business is good, consistent profitability is the first and foremost question to answer. (Location 1808)

We may barely find qualified companies among slow growers and fast growers—the best ones are the stalwarts. (Location 2225)

Sticking to buying good companies also means that we are going to miss some of the best-performing stocks. (Location 2350)

You may not get the star performers, but you get a lot of decent ones such as retail chain Dollar Tree and baking soda and condom maker Church & Dwight. More importantly, you avoid a lot of deep losses. (Location 2392)

I have emphasized the application of the DCF model to Coca-Cola and See's Candy. The point is that the life expectancy of the business is a vital factor when considering buying a company. The companies that have the luxury of changing slowly can stay in business longer and are more valuable to their shareholders. (Location 2673)

There are many ways to lose money in the stock market. Beginning investors lose money on hot stocks and speculation. Growth investors expect speculative growth to endure and pay too much for it. Value investors are addicted to price bargains and overlook the quality of the underlying business. (Location 3304)

At the beginning of this chapter, I suggested playing with stock options, buying on margins, and shorting stocks as sure ways to lose money. (Location 3547)

This is why the Yacktman Fund could outperform the S&P 500 by 11 percent in the down market of 2008 and by 33 percent in the market recovery of 2009. “Cash is king” during a down market. (Location 3825)

You can buy short-term Treasury bills through TreasuryDirect or buy short-term Treasury ETFs such as iShares 1–3 Year Treasury Bond ETF SHY. The ETF, however, does come with some interest-rate risk. (Location 3828)