Tutorial 36-40 Recap
1) COMPOUNDING MACHINES - The Investment Masters seek businesses which can grow over time. Ordinarily these businesses have pricing power which is not eroded by competition. These businesses tend to have low capital requirements to be sustained and are able to reinvest surplus capital at high rates of return. This creates Compounding Machines. Remember the power of compounding.
2) FOCUS ON THE CASH - The Investment Masters tend to focus on the cash coming out of the business. The cash-flow is the money that can actually be utilised by someone if they owned the entire business. The cash-flow is usually far cleaner than the companies profit which can be manipulated by accounting treatment of revenue recognition, depreciation, provisions etc. Be extra careful investing in businesses which have attractive profit statements but earn little or no cash.
3) BUYING THE BOTTOM - The Investment Masters understand that no-one can pick the bottom when investing. It's more important to pay an attractive price versus the value you are getting than to try and pick the bottom of a market. Provided you have bought a good business with a strong balance sheet you should be able to ride out market volatility.
4) TESTING INVESTMENT IDEAS - the Investment Masters understand they are not perfect and it's important to test investment ideas. Do not seek out only people who agree with your investment ideas. It's a worthwhile exercise to seek out opposing views to understand what you may have missed or where you may be wrong.
5) THE DAILY REVIEW - The Investment Masters understand that the entry price of your investment is irrelevant to where the stock will trade. Do not hold a stock in the hope you will break-even at your entry price. Consider each stock on a daily basis and ask yourself would you buy that stock at that price today. If not, it should probably not be in your portfolio. Review your stocks regularly to ensure your investment thesis remains intact and you are holding for the right reasons.