Like many investors, I have spent countless hours studying Warren Buffett’s career. Buffett’s philosophy of thinking about a stock as an ownership interest in a business has influenced generations of successful money managers and private investors. His influence is well known in the investment community. It is less commonly discussed among small business owners. That
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Introduction Some businesses keep customers because they offer the lowest price. Others keep customers because leaving would be inconvenient, expensive, risky, or disruptive. That difference matters. Switching costs are the financial, operational, practical, or psychological costs a customer faces when changing from one product, service, or provider to another. High switching costs can make customer
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If you were a kid in the 1980s or 1990s, no trip to the mall was complete without visiting KB Toys. Mothers across the United States bribed their young kids to behave on shopping trips by promising to take them to KB. When the company went into liquidation in 2008, many people assumed KB Toys
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Introduction What is a business worth? For fundamental investors, the answer ultimately depends on the cash the business can generate for its owners over time. A discounted cash flow analysis, or DCF, is a valuation method that estimates the value of a business by forecasting its future cash flows and discounting those cash flows back
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Introduction Some businesses can raise prices without losing many customers. Others risk losing sales almost immediately. That difference can have a major impact on profitability, cash flow, and long-term business value. Pricing power is a company’s ability to increase prices without causing a significant decline in customer demand. For fundamental investors, strong pricing power can
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Introduction A profitable business eventually faces an important question: What should management do with the cash the company generates? The answer is capital allocation. A company can reinvest cash in its existing operations, pursue new growth opportunities, acquire other businesses, repay debt, repurchase shares, pay dividends, or simply hold the cash. Each decision can affect
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Introduction Revenue tells you how much a company sells. Profit margins help tell you how much of those sales the company keeps. That distinction matters because two companies can generate the same amount of revenue while producing dramatically different levels of profit. Even the same company can grow revenue while becoming less profitable if costs
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Introduction A stock has a price every time the market is open. That does not mean the price tells you what the business is actually worth. This distinction between price and value is one of the central ideas in fundamental investing. Instead of assuming that the market price represents fair value, fundamental investors attempt to
What Is Intrinsic Value? A Fundamental Investor’s Guide Read More »
Successful investing requires more than finding a good company or calculating a valuation. You also need a repeatable process for deciding what deserves your capital. An investment checklist is a structured list of questions and criteria an investor reviews before making an investment decision. It helps organize fundamental analysis, identify risks, test assumptions, and reduce
How to Build an Investment Checklist: A Step-by-Step Guide Read More »
Introduction Many investors spend hours researching a company but overlook the industry in which it operates. That can be a costly mistake. A great management team can struggle in a declining industry. Likewise, an average company can perform well if it operates in an attractive industry with favorable economics. Before buying a stock, fundamental investors
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