One key principle to building a long-term portfolio

Fsp Invest, 29 Sep. 2013

Tags: long-term portfolio, long-term, warren buffett, shares, book value, what is book value



If you want to replicate the kind of long-term investing success that Warren Buffett enjoys there are some key criteria shares should meet. Read on to uncover one key principle to building a long-term portfolio…



When you select shares to form part of a long-term portfolio, there are some criteria shares should meet, Tom Dyson in Palm Beach Letter explains...

Make sure potential shares make this standard

There are several criteria a share must have before you should include it in your long-term portfolio of shares. Here’s one of them…

#1. It must be a continually growing business
This criterion is about safety. You should only select companies that have grown consistently over time.

This begs the question: "How do you measure growth?" One way is to track the growth in book value.

Book value is the amount you'd get if you shut down the business, sold the assets, and paid off any outstanding debt.

Book value is good, but it's not perfect.

For one thing, it does not count intangible values, such as the power of a worldwide brand. You don't need to be a financial analyst to understand the financial value of having a brand such as McDonald's, Apple or Disney.

Book value also underestimates companies whose assets as a whole are greater than the separate parts.

But when book value misses the mark in this way, you shouldn’t mind, since it does so by underestimating value. And that is something that plays in your favour, since with a long-term portfolio it sometimes pays to be conservative than aggressive.

Even though book value is a good way to measure growth, sometimes companies will be growing even though their book value won't show it.

So there you have it, one key principle to building a long-term portfolio.


Related QA

Pic
d.c.heger asked:
MY QUESTION IS – I bought Bitcoin & Etherium some time ago – at first they grew nicely but now they are lower than what I paid for them. Should I [read more]
Published at 04 Apr. 2018 in: Investing 5 shares due to rocket 1 Answer
Pic
kavesh.maharaj.73 asked:
Hi Josh. I would like some advice on TFSA. I can get an interest rate of 7.8% nominal at a bank if I invest the R33k upfront in a fixed deposit [read more]
Published at 19 Mar. 2018 in: Investing Tax free savings vehicle 2 answers
Pic
kavesh.maharaj.73 asked:
Hi Josh Quantum wants to buy back shares from shall investors at what I think is a low price of around R3.86. You tipped the share in February [read more]
Published at 14 Mar. 2018 in: Investing Real wealth 5 answers
Pic
elizastrydom asked:
Hi Timon I am interested in registering for your Red Hot Storm Trader service. I am already a Red Hot Penny Shares investor. My question is [read more]
Published at 28 Feb. 2018 in: Investing Trading platform and broker 1 Answer
Pic
ManuE asked:
I have an interest in investing in Bitcoin, I just don't know how. If I buy Bitcoin with R15 000, how much can make (Return On Investment)? [read more]
Published at 25 Feb. 2018 in: Investing Investment 1 Answer

Related articles:


Latest:

Comments
0 comments



 
 


Youtube Twitter Facebook

Connect with us:    

POPULAR TOPICS
  • Accelerated Investor
  • Accessories
  • Accountancy
  • Accountancy services