Invest Like The Gurus - A Step-by-Step Guide

Warren Buffett has said severally that his strategy for successful investment involves doing three things right: selecting businesses with outstanding economic characteristics; run by competent managers; and buying at a sensible price.

Invest Like The Gurus- A Step-by-Step Guide is a journey into the mind and thinking of legendary investor, Warren Buffet and other successful investors such as Benjamin Graham, Philip A. Fisher, J.M. Keynes, Charlie Munger, Lou Simpson, Ed Thorpe, Joel Greenblatt, etc. It analyzes and synthesizes not only their investment strategies but the less-talked about behavioral attributes of these successful investors which have played a significant part to making them rich.

The course is divided into two broad sections: the psychology of successful investors and their analytical framework. The psychology of successful investors discusses the way these successful investors think about a stock, what it represents and the financial markets and its actors in general. Specifically, it discusses a practical approach to successful investing which involves seeing a stock investment as a part ownership of an outstanding business, taking a long-term approach, avoiding market timing, concentrating investments in few securities which one has excellent understanding of their potential risk and return possibilities. To be successful, these investors advise that it is important to stay within one’s circle of competence.

The second part of this journey looks at key metrics that can reveal a business with potentials for a lasting competitive advantage (what Warren Buffett calls wide moat), such as a business with outstanding economic prospects, gushing out more cash than it requires, high return on capital and equity, employing limited debts, with a competent shareholder-friendly management that exhibits candor in communication with shareholders and high ethics in financial reporting. This section also discusses in detail practical approaches to spot earnings manipulation by management and avoid such companies which are associated with poor investment returns.

As Warren Buffet would always say, a terrific business with outstanding economics and great management can be a bad investment if bought at a high price (prices that do not reflect their intrinsic value). The course concludes with how to estimate intrinsic value, challenges with intrinsic value estimation, and how to overcome these challenges. This section also offers a more practical alternative to buying an outstanding stock at a reasonable price.

The importance of checklist has been documented in several fields of human endeavor. To make the course very practical, key metrics to spot outstanding businesses are backed by a list of checklist so the investor does not leave out key and tiny details that may be crucial to an effective decision of whether to pick a stock or not.