Warren Buffett, nhà đầu tư huyền thoại, tạo danh mục chứng khoán như thế nào. Cách ông tìm kiếm và lựa chọn cổ phiếu của các doanh nghiệp có lợi thế cạnh tranh và triển vọng tăng trưởng bền vững.
Creating a Portfolio Like Warren Buffett Creating a Portfolio Like Warren Buffett A High-Return Investment Strategy Jeeva Ramaswamy John Wiley & Sons, Inc Copyright © 2012 by Jeeva Ramaswamy All rights reserved Published by John Wiley & Sons, Inc., Hoboken, New Jersey Published simultaneously in Canada No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the Web at www.copyright.com Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose No warranty may be created or extended by sales representatives or written sales materials The advice and strategies contained herein may not be suitable for your situation You should consult with a professional where appropriate Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993, or fax (317) 572-4002 Wiley also publishes its books in a variety of electronic formats Some content that appears in print may not be available in electronic books For more information about Wiley products, visit our web site at www.wiley.com Library of Congress Cataloging-in-Publication Data Ramaswamy, Jeeva, 1972– Creating a portfolio like Warren Buffett : a high return investment strategy / Jeeva Ramaswamy pages cm Includes index ISBN 978-1-118-18252-9 (cloth); ISBN 978-1-118-22742-8 (ebk); ISBN 978-1-118-24036-6 (ebk); ISBN 978-1-118-26501-7 (ebk) 1. Investments. 2. Portfolio management. 3. Buffett, Warren. I. Title HG4521.R276 2012 332.6–dc23 2011045521 Printed in the United States of America 10 9 8 7 6 5 4 3 2 To my mentors: Warren Buffett and Peter Lynch Contents Acknowledgments xi PART I: Warren Buffett Investment Principles Chapter 1: Replicating Warren Buffett’s Investment Success Chapter 2: Business-Like Investing Chapter 3: Long-Term Investing 21 Chapter 4: Permanent Loss of Capital 31 PART II: Stock Research Checklist 35 Stock Research Checklist— Business Characteristics 37 Chapter 6: Stock Research Checklist—Earnings 49 Chapter 7: Stock Research Checklist—Debt 65 Chapter 8: Stock Research Checklist—Equity 75 Chapter 9: Stock Research Checklist—Profit Margin 79 Chapter 5: Chapter 10: Stock Research Checklist—Capital Investment 85 Chapter 11: Stock Research Checklist—Management 95 vii viii Contents Chapter 12: Stock Research Checklist—Dividend 107 Chapter 13: Stock Research Checklist—Assets 111 Chapter 14: Stock Research Checklist—Inventory 119 Chapter 15: Stock Research Checklist—Share Buybacks 121 Chapter 16: Stock Research Checklist—Insiders 127 Chapter 17: Stock Research Checklist—Institutional 133 Chapter 18: Stock Research Checklist—Inflation 137 Chapter 19: Stock Research Checklist—Cyclical Company 139 Chapter 20: Stock Research Checklist—Turnaround 143 Chapter 21: Stock Research Checklist—Stock Price 159 Chapter 22: Stock Research Checklist—Infosys 165 Chapter 23: Intrinsic Value 191 PART III: Investment Management 203 Chapter 24: Margin of Safety 205 Chapter 25: Where to Search for Stock Prospects 211 Chapter 26: Portfolio Management 223 Chapter 27: Selling Strategy 235 Chapter 28: Mr Market and Investor Psychology 239 Chapter 29: Risk Management 253 Chapter 30: Options 259 270 Investment Management Warren Buffett has an analogy involving Ted Williams Williams swung only when the ball reached his comfortable point He did not swing the bat any other time In baseball there are three strikes, but in investing you not have to take a single strike You can patiently wait for the perfect pitch If the market price is not in your buy range, simply ignore the quote The next day, the market comes back with a new quote If you like the price of it, swing; otherwise ignore it If the market makes you act, then you will end up losing money You need to be a decision maker; not let the market price influence you to act The simple rule to follow is to buy the stocks that are trading at or below your buy price You should not violate this rule at any time If you are not buying and selling all the time, it does not mean that you are not making progress Just wait for the perfect pitch and when it comes, swing big At other times, just monitor the progress of the company When the stock reaches a price substantially above the intrinsic value of the business, sell the holding and buy other undervalued securities Notes PART I: Warren Buffett Principles Chapter 1: Replicating Warren Buffett’s Investment Success 1. Warren Buffett interview with Charles Brandes, May 1993 2. Buffett Partnership Ltd letter, May 29, 1969 Chapter 2: Business-Like Investing 1. “Buffett Listed by Fortune with Wall Street Winners,” Omaha WorldHerald, July 31, 1983 Quoting from Fortune magazine, August 8, 1983 2. Horsehead holdings corp., News, www.horsehead.net 3. Janet Lowe Warren Buffett Speaks—Wit and Wisdom from the World’s Greatest Investor New York: John Wiley & Sons, 1997, p 150 4. Janet Lowe Warren Buffett Speaks—Wit and Wisdom from the World’s Greatest Investor New York: John Wiley & Sons, 1997, pp 94–95 5. Ibid, Page 150 6. Sam Thorson “Warren Buffett, Omaha in search of social challenges,” Lincoln, Nebraska Journal and Star, March 18,1973, p 6F 7. Robert Dorr “Newspaper Holdings Kind to Omaha Investor Buffett.” Omaha World-Herald, April 16, 1978, p 6J Chapter 3: Long-Term Investing 1. Roger Lowenstein Buffett: The Making of an American Capitalist New York: Random House, 1995, p 152 2. “Warren Buffett Talks Business”, The University of North Carolina, Center for Public Television, Chapel Hill, 1995 3. Berkshire Hathaway annual meeting, Omaha, 1996 4. “Warren Buffett Talks Business”, The University of North Carolina, Center for Public Television, Chapel Hill, 1995 271 272 Notes 5. Andrew Kilpatrick, Of Permanent Value: The story of Warren Buffett, (Birmingham: AKPE, 1994) p 568, Quoting from Forbes, August 6, 1990 Chapter 4: Permanent Loss of Capital 1. “The Forbes Four Hundred Billionaires,” Forbes 400, October 27, 1986 PART II: Stock Research Checklist Chapter 5: Stock Research Checklist—Business Characteristics 1. “The Forbes Four Hundred Billionaires,” Forbes 400, October 27, 1986 2. Berkshire Hathaway Annual report, 2009 Chapter 6: Stock Research Checklist—Earnings 1. Coca-Cola (KO) annual and quarterly reports, SEC filings, news releases, and content from www.coca-cola.com 2. Janet Lowe Warren Buffett Speaks—Wit and Wisdom from the World’s Greatest Investor Hoboken: John Wiley & Sons, 1997, pp 94–95 3. Goodyear Tires (GT) annual and quarterly reports, SEC filings, news releases, and content from www.goodyear.com 4. Berkshire Hathaway Annual report, 2009 5. Sharp Compliance Corp (SMED) annual and quarterly reports, SEC filings, presentation, news releases, and contents from www.sharpsinc com 6. Pinnacle Airlines (PNCL), annual and quarterly reports, SEC filings, presentations, and press release from, www.pncl.com Chapter 10: Stock Research Checklist—Capital Investment 1. Roger Lowenstein Buffett: The Making of an American Capitalist New York: Random House, 1995, p 200 Chapter 11: Stock Research Checklist—Management 1. “Warren Buffett talks business”, The University of North Carolina, Center for Public Television, Chapel Hill, 1995 2. Robert Dorr “Investor Warren Buffett Views Making money as ‘Big Game.’ ” Omaha World-Herald, March 24, 1985, p 11 Chapter 13: Stock Research Checklist—Assets 1. Courier-Express v Evening News, testimony of Warren Buffett, pp 50–52 Notes 273 Chapter 16: Stock Research Checklist—Insiders 1. iGATE, annual and quarterly, SEC filings, and news items and contents from www.igatecorp.com 2. finance.yahoo.com, iGATE insider information Chapter 18: Stock Research Checklist—Inflation 1. Warren E Buffett “How Inflation Swindles the Investor”, Fortune, May 5, 1977, p 250 Chapter 20: Stock Research Checklist—Turnaround 1. Select Comfort Annual report, 2008 2. Select Comfort annual and Quarterly reports, SEC filings, news release, and content from www.selectcomfort.com Chapter 21: Stock Research Checklist—Stock Price 1. Warren E Buffett “The security I like best”, The commercial and financial Chronicle, December 6, 1951 Chapter 22: Stock Research Checklist—Infosys 1. Infosys annual and quarterly reports, SEC filings, news releases, and content from www.infosys.com Chapter 23: Intrinsic Value 1. Infosys annual and quarterly reports, SEC filings, news releases, and content from www.infosys.com PART III: Investment Management Chapter 24: Margin of Safety 1. Berkshire Hathaway Annual Meeting, Omaha, May 1, 1995 Chapter 25: Where to Search for Stock Prospects 1. Jim Rasmussen “Billionaire talks Strategy with Students.” Omaha WorldHerald, January 2, 1994, p 17S 2. Valueline Investment Survey, www.valueline.com 3. Joel Greenblatt The Little Book that Beats the Market Hoboken: John Wiley & Sons, 2010 274 Notes 4. Magic Formula Investing, www.magicformulainvesting.com 5. Wall Street Journal Chapter 26: Portfolio Management 1. Berkshire Hathaway Annual Letter, 2009 2. Berkshire Hathaway annual meeting, Omaha, May 1, 1995 3. “Warren Edward Buffett” Forbes 400, October 21, 1991, p 151 4. Berkshire Hathaway annual report, 2009 Chapter 28: Mr.Market and Investor Psychology 1. Warren Buffett, 1984 Graham and Dodd seminar 2. Roger Lowenstien Buffett: The Making of an American Capitalist New York: Random House: 1995 3. Warren E Buffett, “How Inflation Swindles the Equity Investor,” Fortune, May 5, 1977, p 250 4. “Buffett listed By Fortune with Wall street Winners,” Omaha World-Herald, July 31,1983 Quoting from Fortune magazine, August 8, 1983 5. “Eye,” Women’s Wear Daily, October 10, 1985, p 10 6. Robert Dorr “Buffett’s Right-hand man,” Omaha World-Herald, August 10, 1986, p 7. Robert Lenzner “Warren Buffett’s Idea of Heaven: I don’t have to work with people I don’t like,” Forbes 400, October 18, 1993, p 40 8. L.J Davis “Buffett Takes Stock,” The New York Times Magazines, April 1, 1990, p 16 Chapter 31: Cigar-Butt 1. Warren Buffett and Walter Schloss, discussion, New York Society of Security Analysts, December 6, 1994 2. Roger Lowenstein Buffett: The Making of an American Capitalist New York: Random House: 1995 p 133 3. Robert Lenzner, “Warren Buffett’s Idea of Heaven: I don’t have to work with people I don’t like,” Forbes 400, October 18, 1993, p 40 Bibliography 1. Roger Lowenstein Buffett: The Making of an American Capitalist New York: Random House: 1995 2. Janet Lowe Warren Buffett Speaks—Wit and Wisdom from the World’s Greatest Investor New York: John Wiley & Sons, 1997 3. Robert G Hagstrom The Essential Buffett, Timeless Principles for the New Economy New York: John Wiley & Sons, 2001 Notes 275 4. Peter Lynch & John Rothchild One up on Wall Street: How to Use what you Already Know to Make Money in the Market New York: Simon & Schuster, 1989 5. Peter Lynch & John Rothchild Beating the Street New York: Simon & Schuster, 1994 6. Robert G Hagstrom The Warren Buffett Way Hoboken, NJ: John Wiley & Sons, 2005 7. Robert G Hagstrom The Warren Buffett Portfolio: Mastering the Power of Focus Investment Strategy New York, 1999 John Wiley & Sonc Inc 8. Mary Buffett and David Clark Warren Buffett and Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage New York: Simon & Schuster, 2008 9. Mary Buffett and David Clark The New Buffettology: ThePproven Techniques for Investing Successfully in Changing Markets that have made the Warren Buffett the World’s Most Famous Investor New York: Simon & Schuster, 2002 About the Author Jeeva Ramaswamy is a managing partner of GJ Investment Funds, an investment fund modeled after the original 1950’s Buffett partnership Since its inception in November 2008, GJ Investment Funds delivered compounded annual return of more than 72 percent (net to investors) He has been favorably profiled in International Alternative Investment Review and Hedge Fund Exchange Prior to GJ Investment Fund, he was CEO for Miracle Software Inc., an information technology and solutions company He holds a bachelor’s degree in Electrical Engineering from the Coimbatore Institute of Technology and is a member of the Indus Entrepreneurs (TiE) Association He strongly believes in a balanced life between work, family, and personal time He enjoys spending time with his wife and child He loves reading and analyzing business investment opportunities 277 Index Berkshire Hathaway, 3–6, 10–12, 22, 54–55, 90, 124, 227–228, 230, 246–247, 263–264 BNF See Burlington Northern Santa Fe book value discounts from, 216 stock price and, 162–163 brand name, 38–39 brand, reigniting, 152 Brandes, Charles, Branson, Richard, 99 broker commission, 27–29 Bryne, Jack, 90–91 Buffalo Wild Wings, Inc., 96, 103–104, 237–238 Buffett Partnership, 3–5, 11 Buffett, Warren, 3–7, 10–12, 18–22, 25, 28–29, 31, 97–98, 112, 133, 137, 212–213, 245, 251, 269–270 Burlington Northern Santa Fe, 40, 56 business owner, thinking like, 10 BusinessWeek, 221 business dirty type, 43 hard to replicate, 38–42 nature of, 42–43 A AAPL See Apple Computer accountant expenses, 28 Amazon, 243 American Express, 235 amortization, 192 AMZN See Amazon analysts, following, 133–134 Appaloosa Management, Apple Computer, 23–24, 62–63, 92–93 asset-intensive companies, 40 assets hidden, 111–112 under-valued, 117 vested benefits and, 115–117 at the money, 260 ATP Oil and Gas, 214–215 ATPG See ATP Oil and Gas AutoNation, AutoZone, average diluted shares outstanding, 122 B Balakrishnan, V., 182 bank credit line, 197 Barron’s, 221 benefits, pension assets and, 115–117 279 280 Index business (cont’d) turning around, 143–157 understanding, 37–38 buy and hold, 21 buying, when to, 269 BWLD See Buffalo Wild Wings, Inc C calls, 259 capital expenditure, 192–193 capital gains taxes, 26–27 capital structure, improving, 152–153 capital-intensive business, 87–89 cash generators, 214 cash preservation, 149–153 catalysts, 163 Chrysler, 115 cigar-butt investing, 3, 263 Citigroup, 135 CL See Colgate-Palmolive client concentration, 63–64 Coca-Cola, 38, 52, 58, 60, 70–72, 76–78, 80–81, 83, 86, 88–89, 116, 122, 131, 160 Cognizant Technology Solutions, 102–103 Colgate-Palmolive, 216 commission, broker, 27–29 commodity-type business, 40–42 company fundamentals, company visits, 220–221 company, cyclical, 139–142 competitive, spending to remain, 87–89 cost reduction, 149, 151 countries, diversification with, 233–234 credit line, 197 CTSH See Cognizant Technology Solutions Cumming, Ian, current ratio, 66–69 cyclical companies, 139–142 D day trading, avoiding, 256–257 debt equity versus, 77–78 long-term, 69–71 management of, 65–66 short-term, 66 Dell, 40–41 depreciation, 192 dilution, 196 Infosys, 200 discount rate, 193, 195–196 Infosys, 199 discounts, from book value, 216 Disney, Walt, 99 diversification, 223–228, 256 countries, 233–234 dividend, 107–108 percentage of earnings paid as, 108–109 E earnings future, 191–198, 205–210 increase due to one-time event, 56–58 earnings before interest and taxes, 82 earnings growth, 49–51 earnings outlook, 101–105 earnings per share, 49 earnings release, Securities and Exchange Commission submissions versus, 101 EBIT See earnings before interest and taxes economic cycle, revenue cycle and, 139–142 EDYN See Envirodyne emotionless investing, 244–247 Envirodyne, 42 EPS See earnings per share ESL Investments, ETF See exchange-traded fund exchange-traded fund, 22 expertise, investing in area of, 89–92 F fear, 240–242 financial position, 150–151 financial statements, understanding, 97 Fisher, Phil, Forbes, 221 Ford, 115–116, 140–141 Fortune, 221 fundamental investing, 10 fundamentals, future earnings, 191–198, 205–210 outlook, 101–105 future owner income, 194–196 G Gates, Bill, 99 GEICO, 10–11, 90 General Electric, 56, 73 General Motors, 115–116 GJ Investment Funds, 6, 229 GlaxoSmithKline, 216 Goldman Sachs, 56, 73 Goodyear Tire, 51–52, 59, 61, 71–73, 76, 78, 80, 82–83, 86, 89, 108, 114–117, 122, 132, 160–161 Gopalakrishnan, S., 182 Graham, Ben, 1, 3, 229, 263 Greece, debt crisis, 12 greed, 242–244 Greenblatt, Joel, 218 gross profit margin, 81–82 growth, 95–96 Index 281 growth companies, growth rate, price/earnings ratio and, 159–161 growth stocks, 217 GSK See GlaxoSmithKline H hard-to-replicate business, 38–42 HD See The Home Depot hedge funds, Hensler, Jim, 14–17 herd mentality, avoiding, 256 hidden assets, 40, 111–112 The Home Depot, 44–45 Honda, 115 Horsehead Holdings Corp., 14–17 hot industry, 46–47 I IGATE Corporation, 103–104, 130–131, 225–226 IGTE See IGATE Corporation in the money, 260 industry, hot, 46–47 inflation, pricing and, 137–138 Infosys Limited, 165–189 owner income projection, 198–201 INFY See Infosys Limited initial public offering, 47 insider trading spotlight, 219 insider transactions, 127–128 insiders percentage of stock owned by, 129–132 stock purchases and, 127–129 institutional ownership, percentage of, 134–135 Intel, 93, 207 interest expense, 71–73 intrinsic value, 10 stock price and, 161–162 282 Index intrinsic value calculation, 197–198, 266 Infosys, 200–201 inventory buildup, 119–120 investing strategy, 89–92 investing emotionless, 244–247 long-term, 21–22 research-based, 257 investment principles, 1, investment processes, 35 IPO See initial public offering J Jobs, Steve, 99 K Kmart, L Lampart, Edward, Las Vegas Sands, 67–68 LEAPS See long-term equity anticipation securities Leucadia National, lifetime partnership, 91 The Little Book that Beats the Market, 218 loan to value, 224 long-term debt, 69–71 equity versus, 77–78 long-term equity anticipation securities, 261–262 long-term growth rate, recent earnings versus, 54–56 long-term investing, 21–22 losers, picking, 28–29 loss, short-term, 33–34 low-cost producer, 41 Lowe, Janet, 18–19 LTV See loan to value LVS See Las Vegas Sands Lynch, Peter, 35, 43, 133, 221, 229 M magazines, 221 magic formula, 218 The Making of an American Capitalist, 245 management delivering on promises, 101–105 margin of safety, 205–210 margin, avoiding purchases on, 254–256 market data, 219–220 market segment, dominating, 45–46 market timing, 249–252 market, predicting, MCD See McDonald’s Corporation McDonald’s Corporation, 43, 112 media, 247–248 Microsoft, 39, 92 MidAmerican Energy, 227–228 moat, 38–42 money at, 260 in, 260 out of, 260–261 velocity of, 237 Munger, Charlie, 3, 25, 251 Murthy, Phaneesh, 225 N national chain, 43–44 National indemnity Co., 263–264 net profit margin, 79–80 net receivables, percentage of, 112–115 non-exciting industry, 42–43 O operating cash flow, 58–59 Oracle Corporation, 163 ORCL See Oracle Corporation out of the money, 260–261 owner earnings, 52–53 owner income future, 194–196 projection, 198–201 P P/E ratio See price/earnings ratio patents, 39–40 pay-off duration, 71 pension assets, vested benefits and, 115–117 perfect environment, 248 performance reporting, 98 permanent capital loss, 32 Pinnacle Airlines, 63–64 portfolio managing, 231–233 managing your, 266 monitor the company’s, 267 number of stocks in, 228–229 position sizing, 229–231 preferred stock, 73–74 pretax profit margin, 82–83 price myopia, price/earnings ratio, 159–161 profit margin gross, 81–82 net, 79–80 pretax, 82–83 puts, 259–261 R raiders, 117 railroad companies, 40 RCM Technologies, 208–210 RCMT See RCM Technologies, 208–210 recent earnings, long-term growth rate versus, 54–56 recession, performance during, 59–61 related-party transactions, 96–97 Index 283 research and development, percentage of revenue spent on, 92–94 research-based investment approach, 257 retained earnings, 51–52 retirement of stock, 125 return on assets, 85–87 return on equity, 75–76 return on invested capital, 87 revenue cycle, economic cycle and, 139–142 Ringwalt, Jack, 263–264 risk systematic, 253 unsystematic, 253–257 ROA See return on assets ROE See return on equity ROIC See return on invested capital S sales, percentage due to single product, 62–63 SCSS See Select Comfort Corp Sears Holdings Corporation, Securities and Exchange Commission submissions, earnings release versus, 101 See’s Candy Shops, 39, 264 Select Comfort Corp., 128–129, 145–157, 231–233 sell decisions, making, 267 senior management, success oriented, 98–101 share buy-backs, 122–124 share dilution, 194 shares, total outstanding, 121–122 Sharps Compliance Corp, 56–58 shopping mall visits, 221–222 short-term debt, 69–71 simple business, 37–38 size, 41 284 Index Skechers, 119–120 SKX See Skechers SMED See Sharps Compliance Corp Southwestern Energy, 24 spending money to remain competitive, 87–89 stock price book value and, 162–163 intrinsic value and, 161–162 retained earnings and, 51–52 stock research checklist, example, 165–189 stock bargain-priced, 217 identifying, 266 percentage owned by insiders, 129–132 research, 266 retirement of, 125 selling, 235–238 success oriented, senior management, 98–101 sustainable competitive companies, 227 SWN See Southwestern Energy systematic risk, 253 T Tepper, David, Terex Corporation, 105 TEX See Terex Corporation Thorson, Sam, 19 total outstanding shares, 121–122 Toyota, 115 treasury stock, 124–125 turnaround companies, 143–157 U under-valued assets, 117 unsystematic risk, 253–257 V Value Line, 211–212 Investment Survey, Standard Edition, 212–217 Small and Mid-Cap Edition, 217–218 velocity of money, 237 vested benefits, pension assets and, 115–117 visits company, 220–221 shopping mall, 221–222 W Wal-Mart, 41–42, 46, 99–100 Wall Street Journal, 218–220 Walt Disney Company, 25, 99–100 Walton, Sam, 46, 99 Washington Post, 21–22 Weinberg, Marshall, 50–51 Wit and Wisdom from the World’s Greatest Investor, 18–19 WMT See Wal-Mart Y Yahoo! Inc., 46–47 YHOO See Yahoo! Inc Z ZINC See Horsehead Holdings Corp