Check out the Investing Mastermind Podcast on Apple Podcasts or Spotify hosted by Michelle Marki and Signe Lonholdt!
Michelle Marki and Signe Lonholdt are on a journey of investing like the best investors Warren Buffett and Charlie Munger. We seek to inspire and encourage people, especially women, to become their own investors. Even though we are not financial professionals and none of this is investing advice, we hope you enjoy! Visit our websites: www.michellemarki.com and www.aahus.com.
Part three of an ongoing series on Warren Buffett and Charlie Munger’s 4 principles of investing. We walk through these investing principles in the form of a checklist that you can download here: https://www.aahus.com/2021/05/one-of-most-important-artifacts-or.html
We go through these 4 steps in a company before we invest in its stock. There are 2 rules of investing according to Warren Buffett: Rule #1: don’t lose money, and Rule #2: never forget Rule #1. We don’t want to lose our hard-earned money so that’s why it’s important to do this “homework” before we buy any stocks.
The 4 investing principles/steps we discuss in this series are: 1) Understanding the business (circle of competence), 2) Management (honest & competent), 3) Moat (favorable long term prospects), and 4) Margin of Safety (available at an attractive price).
When we invest in a wonderful company, it’s because it has a durable, competitive advantage that is known as its moat. Many companies might not have a moat at all, so it’s key to identify the business’s strengths and weaknesses. Much like the medieval castle moat, a business moat helps prevent its competitors from taking away market share.
You want to look for business advantages that sustain the business for a long period of time, such as these moats: brand, switching, network effects, secrets, toll bridge, price/cost. We discussed examples of moats.
Note: We apologize for some audio issues we had in this episode, and have made adjustments for improved future episodes. Thank you for understanding.