Warren Buffett Investing System

Click here to get a PDF of this post

I watched the “Becoming Warren Buffett” documentary when it first came out and took notes. Some how I never wrote the blog post I intended to write and just found my notes when I was doing a recent digital declutter.

Here is a summary of my notes I took on Mr. Buffett’s habits as I watched the documentary:

  1. Warren kept an inner scorecard of how he was doing and did not concern himself with the external noise of critics and trolls. He knew exactly what he was doing and stuck to his process. I remember during the internet bubble in 2000 where critics began to start saying the Oracle of Omaha’s value investing no longer worked and the world had changed, they were all proven wrong.
  2. He was obsessed with buying future cash flows at a discounted price in the present. He could see the return on his investment at his entry based on the projected profits of the company he was buying.
  3. He believed the highest value activity he could do was read, he has read for an average of 5-6 hours a day his whole adult life as the Chairman of Berkshire Hathaway.
  4. Some of his most important reading is the financial statements of the companies he is looking to buy.
  5. Warren looked at the potential power of compounding returns early in his life and saw the potential of letting capital compound and grow instead of spending it or cutting a winning investment short by selling too early.
  6. He absolutely loved math and could do most of his math instantly in his head. This is a huge edge over others who have their decisions driven by emotions and ego.
  7.  Harvard Business School did not choose him to attend but he chose himself and went on to attend Columbia University to learn under Benjamin Graham. (He got an A+ from Graham.)
  8. Buffett took a Dale Carnegie course to learn public speaking, he got a huge return on this investment.
  9. He married the right person, his wife’s support was a key to his success, as she supported him in all his endeavors.
  10. The #1 rule of Warren Buffett is to buy great businesses at terrific prices to create a great risk/reward ratio on entry.
  11. Mr. Buffett probably spends 99.9% researching a  company and .01% buying companies then 99.9% of the time holding great companies.
  12. Warren Buffett possesses a consistency and discipline of action greater than the majority of other investors and CEOs.
  13. His initial goal was to be a millionaire by 30 years old and eventually the richest man in the world. He had a target and goal very early in life. This was a key filter in his decisions that eventually allowed him to reach his goals.
  14. His patience for waiting for the best pitches is unparalleled. He could wait years until he got the right price on the right company before buying.
  15. Warren Buffett is very careful to only buy companies where he is very careful to stay inside his circle of competence for their business model, industry, and management.
  16. The emotions of fear and greed are very dangerous in the stock market unless you are buying other’s fear and selling to other’s who are greedy.
  17. He is not materialistic, he prefers the simple enjoyments in life over complex material things. He prefers watching Nebraska college football in jogging pants with popcorn over owing a yacht and dealing with a crew of employees.
  18. You don’t have to be a genius to become wealthy you just need a good process and enough time.
  19. Do something you love to make money. If you can tap dance to work  you’ll have a greater chance of success in life and business.
  20. His edge in investing comes from risk/reward ratios at entry, discipline, compounding, focus, and detachment from ego and emotions. Give him enough time and he will win.