Anyone who wants a robinhood referral, please let me know. They have commision free trading platform. I have used them about 2 years and liked it so far (compared to the commission paid to Scottrade, Robinhood is a gem 🙂
My rules on stocks
The following is my own summary of past mistakes, dos and don’ts…
1. Thou shall not buy and hold an IPO on its first day.
(my lesson from NINE, LFT and GSIT)
2. Thou shall not try to catch a falling knife. (15Oct09) On the other hand, buy on the strength (HUN, BEE).
(my lesson on Nokia, Crocs after bad earning report)
3. Thou shall not average down for an unproven stock. (15Oct09) Bought THQI too early.
(my lesson from SNDA, LFT)
4. Thou shall not bet on earnings.
(Except use option, and bet only lunch money)
5. Thou shall not buy and hold a good stock at bubble price.
(Vanke, China Merchants Bank)
6. Think first about downside and how much downside I can take: PALM (Jan/Feb 2010).
7. Moat, moat, moat (durable competitive edge, or competitive landscape, another lesson from PALM).
7. To be continued…
Reference: my stock lessons (I to VII).
I think I tend to make more mistakes when my account has money: e.g., the LFT buy, not just the loss itself, but taking away my attention from CROX.
My un-scientific rules (from my own exp)
1. Take some money off the table if already up big percentage, don’t be too greed (CROX Oct 31. earning lesson);
2. Swing to lower cost, if bought too high initially, leave some money at the side;
3. A stock needs consistent attention, may turn out to be not good (NINE, CROX); vice versa (MR)
4. Retailer is not as good as wide moat co in the long run (CROX, SBUX vs. K), but how about MCD, exception?
5. Buy the stocks when
5.1 The market is weak (the company fundamental is fine)
5.2 Barron article bashing (CROX in June; recently Berkshire)
6. Sell the stocks when
6.1 People are all excited about it, news media all over it. Couple months ago the top 10 richest Chinese has 6 or 7 from real estate business.
1) Learn more about fundamental analysis, working toward CFA?
2) Be more focus, less emotion,
Buffett’s rule for buying stocks/business, he will only buy a business (some more rules in Chinese here, note most Chinese books about Buffett are no good, the authors did not understand the true spirit of value investing, or only understand it at book level, no practical experience).
1. He can understand (he understands roughly 10% of all business);
2. A business has moat, or durable competitive edge;
3. A good management team (motivated, they work because of passion for the job, not for financial incentives);
4. At an attractive price.
Because his Berkshire empire is so big now, he only looks at bigger companies so that it could have some meaningful impact on BRK top/bottom line. We as small investors don’t have this constraint.
Berkshire annual meeting minutes (Omaha World Herald, takes a while to load, quote below);
A shareholder asks Buffett to explain his investment strategies, like value investing, and how teach young people. Buffett says he brings in college students to talk with them each year. Buffett says he tells them it is important to know how to value a business and to know how to judge the markets. He says there would be nothing about modern portfolio theory or anything like that. He says it is important to know your circle of competence, start small and learn as you go along. Buffett says some accounting principles also are important. And then learn about market fluctuations and learn that the market is there to serve you. And that is not an issue of a high IQ, but rather an emotional stability and inner peace about the decisions you have made. Munger says there is the basic problem of always having half the future investors in the world in the bottom 50 percent. Munger says largely people should reduce the nonsense. Buffett and Munger agree that emotional makeup is more important than a high IQ. Buffett says he is asked by college students, “what are we being taught that is wrong?” Munger asks how Buffett can handle that question in just one session.
notes (GuruFocus, quote below):
Buffett commented that in 2000 Berkshireâ€™s Stock price was substantially below intrinsic value, that currently the market price is moderately below Intrinsic Value, but not as large a discount as it was in 2000.
Buffett: annual (2008) letter to shareholders
Questions for Warren in this year (2009) annual shareholder meeting
1. Why invest in Utilities? Does not Utilities need a lot of capital, what’s the difference between Utilities and the original Berkshire (textile business)?
2. Why keep American Express and Moody? Don’t we see the permanent demage of consumer credit, and the rating companies? How about Wells Fargo? Why not sell all BAC shares?
3. Derivatives. There are a lot crititics on this, and you have explain this very well in the shareholder letter. But, as I read “Poor Chariles Almanack”, Charile is much more cautious on derivatives, and its systemantic risk (chain effect of credit risk form counter parties).
Buffett on the market
New York Times Op-ed piece (10/17/08): Buy American. I Am.
Buffett article Fortune Magazine 11/10/2001: Warren Buffett on the Stock Market: What’s in the future for investors. This article was co-written with Carol Loomis.
Master pieces by Buffett and Munger
Buffett annual letters to shareholders
Buffett Univ. of FL talk (PDF)
The art of picking stocks (Charlie Munger)
Human Misjudgement (Charlie Munger)
Poor Charlie’s Almanack: a collections of Charlie Munger’s talk, and words on Charlie from friends/family members.
Charlie Munger articles (collected by Sandman’s Place).
Charlie’s commencement speech at USC (the whole thing is about 2 hours, Charile’s speech is from 43′ to 1:20′)
Buffett Followers (don’t follow them 🙂
Carol. J. Loomis/Fortune 02/04/09: Buffett’s metric says it’s time to buy . Carol is a close friend of Buffett and has followed Buffett for a long time.
CNBC Warren Buffett Watch: recently Buffett appeared quite a bit on CNBC, I suspect he does that for two reasons: 1) He enjoys it; 2) To educate the public and do some PR for Berkshire in the bad economy (cheer leader).
Jeff Matthews is maintening a blog titled “I am not making this up”. He wrote heavily on Buffett such as this one. As a matter of fact, he wrote a book “Pilgrimage to Warren Buffett’s Omaha”, in which he shared his thoughts when attending Berkshire annual shareholder meeting, is loosely based on the articles on his blog.
Books on Buffett
Buffett likes to write, although he has not written a book yet. The closest book he authored is this one “The Essays of Warren Buffett: Lessons for Corporate America“, which is a collection of Buffett’s letters to the shareholders of Berkshire Hathaway written over the past few decades that together furnish an enormously valuable informal education.
Chinese version è¯´æœåŠ›â€”â€”è¯´æœä»–äººçš„50ä¸ªç§˜å¯† here.
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Warren Buffett Secret Millionaire’s Club (link here)