Invest in the business

Invest in the business

It was Graham who taught Warren, instead of asking
(a) in what security? and
(b) at what price? to ask

(a) in what enterprise? and
(b) on what terms is the commitment proposed?

Warren places a great amount of weight on the quality of a company when he makes his investment decisions. One way to determine the quality of management is to see what it does with its earnings.

Does it pays out dividends, or retain them?
If it pay out dividends, does it profitably employ them, or does it squander them on dreams of grandeur?

He began to base his investment decisions on the economic nature of the business. The excellent business with high rates of return on equity, identifiable consume monopoly and shareholder - oriented management became his primary target.

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