Warren Buffetts investment methodology is carefully studied by up and coming investors. His methods were based on Grahams fundamental investing basics outlined in The Intelligent Investor. Buffett, through several years of working with and adjusting Grahams rules, polished a set of his own. The methodology centers on establishing what a particular company is worth. There are several factors which can contribute to a companys value, included in that list are the amount of debt, past performance, and profit margins. Warren outlines six easy steps to determine the true value of any company. To find out if a company has consistently performed well, the net income of the company must be divided by the income that the shareholders receive. In step two the investor must verify the amount of debt attributed to the company. If the company has too much outstanding debt it becomes a high risk investment. To determine debt the total liabilities must be divided by the shareholders equity. Then the investor must shift his attention to the profits. Are the profits high and are they increasing? To do this the net income is divided by net sales. Buffett continues with additional things to consider - how long has the company been public, do the companys products rely on commodity, and if the stocks of the company are selling at 25% discount to its real value. It is important to note that every investor who has been involved directly with Warren Buffett, utilizing his methodology has become extremely successful and financially profitable. "Buffett is one of the few business leaders whose reputation has remained unblemished by the unravelling of so much of corporate America," is how Patrick Hosking describes Buffetts continuing success and respect in the business word. Warren Buffett is all business which makes it difficult to find his personal life philosophy and separate it full from his business ethics. In both his own life and his own business, Warren "took several necessary steps through his leadershipestablishment of a code of ethics, discipline of violators, and creation of an ethical advocate's role". Buffetts greatest strength may be his loyalty. He possesses and preaches to maintain a well educated faith in his system. His life and success is a testament to the American ideals of independence, self sufficiency, and the self made man. Buffett is the physical embodiment of the American Dream. Warren Buffett's story is quintessentially American, states Cornell Rupert of the Independent. His critics and contemporaries agree his success is well deserved. Warren approaches and employs honesty, hard work, trustworthiness in dealing with life. He has a strict set of ethics and refuses to stray or settle. He has always been a simple man with simple taste. Warren drives the same car he bought years ago, and resides in the same house. His only luxury accessory is his private jet but comments that since he has become so well known it is very difficult for him to be comfortable on a public flight. Warren Buffetts unflinching and simple approach to life, business, and ethics is extremely appealing to the average citizen. His life and character have taken him from being merely an extremely successful business man to represents all that is good and odd about America. |