Warren Buffett

Benjamin Graham

Berkshire Hathaway


Investment techniques

Book Reviews


Complete list of articles












































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Investment techniques

Value investment, put simply, means buying a stock, or indeed a business, at less than its intrinsic value. This method of investment was pioneered by Benjamin Graham, the father of securities analysis, and has been modified and enhanced by such legendary investors as Warren Buffett and Peter Lynch. Graham always took the position that value investment was the only real form of investment; anything else was speculation.

There are other investment theories such as modern portfolio theory (mixing unrelated stocks in a portfolio gives less volatility than the average volatility of the stocks); the efficient market theory, which assumes that the market price of a share accurately reflects the information available about that particular investment; and the random walk model.

This section will look at the value investment theories of Graham and others, and the investment approach of Buffett and Munger. It will also discuss, in time, other investment strategies.

case studies

We look at several companies to determine, for our own purposes, whether they are worth further analysis.
Boeing - new

Warren Buffett's approach to investment

Introduction to Warren Buffett -The starting page for Warren Buffett’s investment secrets.
Warren Buffett's investment principles - A summary
Warren Buffett and brand names - An area of particular emphasis for Buffett
Warren Buffett and understanding a company - You need to comprehend a business before investing.
Warren Buffett on debt - Why successful investors like buying into companies with financial strength and little debt.
Dealing with inflation - The ability of a company to raise prices to maintain profitability is important
Sticking to what you know - Management should focus on their areas of strength.
Share buybacks - A company can add value to its shares by buying some of them back, but only for the right reasons.
Return on equity - The ability of a company to earn and increase high returns on its capital is considered by Warren Buffett essential to a share investment in that company.
Price/earnings ratio - Determining the right ratio of price to earnings of a company can influence the decision to invest or not.
Retained earnings - If a company cannot earn more for shareholders on retained earnings than owners can, it should distribute the profits.
Book value - Different intelligent investors have different opinions about the importance of book value to an investment decision.
Company growth - It is not so much the growth in earnings of a company that is important, it is how they grow, and in what areas.
Sound management - Successful investors invest in companies whose management is sound and honest.
Owner earnings - Warren Buffett looks beyond the balance sheet and concentrates on true owner earnings.
The compounding factor
Bringing it all together - A summary of the tests that Warren Buffett is said to apply to a company when considering investment.
The right price to pay

Benjamin Graham

Benjamin Graham's Investment Philosophy - A summary of the lessons given by the man, among whose disciples include some of our most successful investors.
Mr Market - Benjamin Graham’s parable that explains how investors should rely on their own judgment, after careful analysis, and ignore the vagaries of the stock market.
The Margin of Safety - Considered by many successful investors as the key to investment gains. Investors should only buy stock at intrinsic value but with an inbuilt safety margin.

Other approaches