When buying a business, you are essentially becoming a silent partner in that business. Sure, you have a say in the meetings and you get the annual reports; still, you don't have any real control over the day-to-day operations or the allocation of the company's (your) cash.

When a company buys back stock, it is using your cash to increase your ownership by reducing the number of outstanding shares. You end up with a bigger piece of the pie. That's a good thing, right?

Continue Reading Stock Buybacks: What That Means For You ››

A few visitors have asked me to review Mary Buffett & David Clark's Buffettology: The Previously Unexplained Techniques That Have Made Warren Buffett The World's Most Famous Investor. It had been years since I read it—eight, in fact. So, I had to take a day to revisit it (hence no post yesterday).

Buffettology was one of the first "Buffett" books I had read, and I loved it from the very first page. And who could argue the logic provided by someone who sat at the dinner table with Mr. Buffett for the better part of twelve years? I mean, of course, other than me...

Continue Reading Strategy Review: Buffettology ››

Thanks all for your feedback—both in comments and e-mails. Let's start from the top: Babui asked for more examples on how price follows value and how buying and holding through drops can still allow you to come out ahead.

Today, let's look at another example: Procter & Gamble.

Continue Reading Price Follows Value: Procter And Gamble ››

Hi all. A couple of quick points as I won't be doing a full post today. Reason: I am out raising money for our charity—today we're helping raise money for intellectually disabled children. I'll be walking up and down the streets in a bright yellow smock, handing out tootsie rolls—if you happen across North Avenue and Harlem Avenue in Chicago, please feel free to donate a few bucks.

Site Redesign

What are your thoughts on the site redesign. The changes were small—different font, somewhat better categorization (still working on it) and a You are here navigation at the top of each page.

I'd love to get your feedback because you are the ones who read it!

Excuse My Follow-through

A friend mentioned that I ought to get an MBA. I told him that it wouldn't work...that I'm two people—half super-hyper, mind-wandering maniac, part wine drinking, relax-on-a-boat lazy man. Why do I mention this?

There are a few people whom have e-mailed me or posted comments that I promised I would respond to. With every intention of following through, I subsequently forget. I apologize. If there is something you'd like to see, let me know. Remember: I don't give investment advice or stock tips!

That's it for today. I'm going back to the streets—have a great weekend all!

Time is the friend of the wonderful company, the enemy of the mediocre. —Warren Buffett

The decision to buy stock in a company is fairly straightforward. Is it a great business? Is it trading at a significant margin of safety (MOS)? Am I confident in my valuation and assessment? Answer "yes" to those questions and you're on your way to business ownership.

But when do you sell?

Continue Reading When Should I Sell My Stock? ››

Phil Town's Rule #1 is a hot selling item. Its promise of 15 minutes a week of work, guaranteed profits, and no risk is a lofty goal. Like virtually all popular investing books, Rule #1 has inspired groups of followers on one side—people actually making money with the system—and clusters of haters on the other side.

Continue Reading Strategy Review: Phil Town's Rule #1 ››

Let's get back to the basics—Warren Buffett and his teachings. We know that every company has an intrinsic value. Calculating that value is simple—it is the discounted cash that can be taken out of the business during its remaining life. In fact, that calculation can be used to value everything—businesses, CDs, bonds, cars, real estate, the list goes on and on.

Continue Reading Just Because You Know The Value... ››

Back on August 4, 2007, I promised Michael that I would look at the Quicken site and revisit Robert Hagstrom's investment strategies outlined in The Warren Buffett Way. Then, I completely forgot to do so. Sorry Michael—better late than never, right?

If you are not familiar with Hagstrom, he is the portfolio manager of the Legg Mason Growth Trust mutual fund and author of several books: The Warren Buffett Way, The Essential Buffett, and The Warren Buffett Portfolio, among others. The Warren Buffett Way presents a myriad of strategies for valuing companies...and that is precisely this book's weakness.

Continue Reading Strategy Review: Robert Hagstrom's The Warren Buffett Way ››

Washington Mutual has The Power of Yes; we have The Power of No—a much greater power that can be used to avoid major mistakes and horrible businesses. When you invest in mutual funds, you forfeit that power and put it into the hands of the mutual fund managers. And what do they do with that power?

Some of them own Alcatel-Lucent (ALU), and then act surprised and shocked when the company continues to shrink and choke.

Continue Reading From A Mile Away: The Business of Alcatel-Lucent ››

Analyzing companies is fairly straightforward. Finding companies to analyze is a different ballgame. In the U.S. alone, there are more than 10,000 publicly traded companies. With the power of the internet, we can now invest worldwide—bringing the number of available investment options to staggering proportions.

Let's narrow it down a bit.

Continue Reading How To Find Companies Worth Analyzing ››

When you buy stock in a company, what do you feel? Anxiety? Excitement? Do you immediately second guess your decision? Or regret it? Let me guess: refresh, refresh, refresh the screen to see if the price has gone up...then check it every chance you get, but no less than daily.

Continue Reading The Psychology Of Investing In Stocks ››

80 degrees. Sunny. I'm getting a killer tan. And that's about all I'm getting because the fish aren't jumping in my boat the way I had hoped. In fact, we've caught nothing but two small perch for the day, and nary a nibble more. Some guys are sleeping; some are getting frustrated and angry. I'm standing at the back of the boat, sipping a glass of wine and watching the water.

Then it dawned on me: I know exactly how these guys see investing and the markets, and they fish just like they invest.

Continue Reading Fishing For Profits ››