July 5

A 5-step Warren Buffett guide to turbocharge your investing in 2020 and beyond

first_imgA 5-step Warren Buffett guide to turbocharge your investing in 2020 and beyond Enter Your Email Address Image source: Getty Images. I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Kevin Godbold has no position in any share mentioned. The Motley Fool UK owns shares of and has recommended Berkshire Hathaway (B shares) and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short January 2020 $220 calls on Berkshire Hathaway (B shares). Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. “This Stock Could Be Like Buying Amazon in 1997” Simply click below to discover how you can take advantage of this. Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. 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See all posts by Kevin Godbold Kevin Godbold | Tuesday, 31st December, 2019 Making a losing investment can be a crushing experience. And I bet we’ve all had them.Sometimes, there’s no hope of recovery whatsoever, and all we can do is sell out – probably after it’s way too late to save anything but pocket change!5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Warren Buffett is different. It’s rare for him to lose his shirt on an investment, and he said in the 2002 annual report for Berkshire Hathaway, the conglomerate he controls, that he expects every investment he makes to work out well. And he’s got a decades-long record to prove that most do.So, what’s the secret ‘sauce’? Luckily for us, he spelt out his methodology in that 2002 report. I reckon we can use his advice as a five-step approach to turbocharge our investment results in 2019 and beyond.Conservatively financed companiesFocus on the strength of the balance sheet. Look for levels of debt that make sense and a healthy cash balance. Some, such as British super-investor Lord John Lee, tend to target cash-rich firms, for example.I’d also look for ‘hidden’ debt such as pension obligations, lease commitments and excessive, unpaid creditors. The big no-no is over-gearing. Too much debt can go on to sink a company and your investment in it.Competitive strengthA strong trading niche in the market can mark out superior businesses from poor ones. If a company enjoys good trading economics, it’ll probably show up in a consistent record of rising revenues, earnings cash flow and dividend payments. You’ll also likely find robust profit margins and decent-looking returns on capital and equity.Able and honest directorsLook for directors who are good at what they do. They also need to have ‘clean’ reputations. And search for evidence that they operate with integrity.This chimes with advice from Lord John Lee. He also suggests avoiding firms with a high turnover of directors or advisors or both. If that’s happening, there could be hidden trouble in the company.ValuationGood companies can make poor investments if we pay too much for them. Sometimes, over-exuberance in the investing community can drive the valuations of good businesses too high. Any correction to that over-valuation can keep the shares pegged down despite underlying operational progress.Buffett looks for good firms selling at a price that makes sense of an investment. He pays a fair price for good businesses.Risk versus rewardBuffett looks for more upside potential than there is downside risk. This is where the ‘art’ of investing comes in because you won’t find this out by crunching the numbers. Naturally, Buffett has a good eye for spotting such opportunitiesBut I will say that you probably have better judgement than you might suppose. For me, the hardest thing to learn about investing was to trust my own judgement. But if you learn your lessons along the way, I reckon you’ll have a good chance of succeeding with investing in 2020 and beyond. Good luck!last_img read more