Emergic: Rajesh Jain's Blog

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Inspired by Warren Buffett

December 10th, 2004 · No Comments

Paul Allen is reading “The Warren Buffett Way: Investment Strategies of the World’s Greatest Investor.” He writes about some of his learnings:

  • Insurance companies make most of their profits from their investments, not from writing policies. The most important role in an insurance company is Chief Investment Officer. Buffett has been really big in insurance for decades–now I know why. Investing the cash flow well creates large fortunes.

  • Buffett says, “I am a better investor because I am a businessman, and a better businessman because I am an investor.” He doesn’t play the stock market or focus undue attention on macro economics and government reports to time his purchases. He buys stocks with intrisic value with the long term in mind. He said the nine most important words ever written about investing are from his mentor Benjamin Graham: “Investing is most intelligent when it is most businesslike.” When you invest in a company, you own part of a real company, not just paper for trading. Therefore, know everything about the business when you invest in it, as if you were the CEO.

  • Invest only within your circle of competence. What this means to me is that while Buffett avoids high-tech stocks, that is all that I know. My holdings would be entirely different from Buffett’s. But my expertise in internet marketing and online business models will inform my decisions, so I can have a “margin of safety” and know that a company’s value is greater than it’s current stock price (based on an informed model showing net present value of future earnings) before making any purchase decisions.

  • Tags: Management

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