Berkshire Hathaway Inc (BRK.B)

[gfp927z]

Bar, >> I invest just like Buffett <<


I'd like to say that too, but unfortunately I lack Buffett's phenomenal ability to analyze balance sheets, income statements, etc. Other than briefly looking at the revenues and earnings, growth rates, debt level, and PE/PEG, I mainly use the 10 and 20 year charts, along with the nature of the company's business and the sector it is in.

If I only had a single metric to use in picking stocks it would be the 10 and 20 charts, because these quickly summarize the nature of the company's business, how steady it is, how profitable it is, the quality of management, etc. Everything is summarized in the chart. For long term buy/hold stocks you basically just find a nice steady rising long term chart in a solid sector.

So long term buy/hold type stocks are the easiest to select. The companies have done well for a long time, are currently doing well, and will likely continue to do well. These are 'known knowns' (to quote Donald Rumsfeld), and put the odds in your favor.

Where it gets trickier is with other strategies like turnarounds, early stage small caps, cyclicals, asset plays, etc. With turnarounds (I own 4), one conservative strategy is to only invest in a turnaround that you already know fairly well, and which had previously been a long term buy/hold. Current examples are CVGW, JJSF, HAIN, SRCL. The company shouldn't be saddled with too much debt (like KHC, GE, TEVA), or be in a declining sector (like CVX, XOM), and should have a clear turnaround plan and/or new management. But analyzing these stocks takes considerably more research than with a regular buy/hold stock.

Then there are the early stage smaller caps, which is the most fun area. These companies are undiscovered, or just being discovered, and poised for potentially high growth. I have a quite a few of these (GRWG, BABYF, EXLS, VRT, NVMI, etc).

Another strategy involves owning sector ETFs rather than individual stocks. Just pick the most promising sectors and let it ride long term. So far this has provided the best returns from my experience. To balance things out, I keep an equal amount invested in broad market ETFs, and the entire stock allocation is balanced by bonds, cash, and some gold/silver. So not exactly Buffett or Lynch, but it seems like a reasonable approach.

Well, off to the turkey. Hope everyone has a great Thanksgiving :o)