This means investing only in industries and businesses that are easy to understand, easy to value and with highly predictable future cash flows.
If you follow this principle, it would mean focusing only only 1% of stocks in the market and ignoring the 99% that are too difficult to understand and value.
For me, the 99% of industries I ignore/avoid are:
oil and gas, commodities, mining, automotive, alternative energy, loss making companies, airlines, manufacturing, most banks, property developers, shipping etc..
By only focusing on the 1% of business that have very predictable revenue & cash flows, wide economic moats, recurring income, low maintenance capex, high margins, high scalability, high return on capital, I constantly outperform the indexes with very little effort.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
5
Report
Login to post
I think it is possible to have a good understanding of the leading stocks in each industry and increase the possibility of profitability
I think such thinking is too subjective. Buffett just wants to explain the reduction of speculative risk
So how about the 1% of business that have very predictable revenue & cash flows?