The book will concentrate on the investment style of Business Perspective Investing, as practiced by Benjamin Graham and Warren Buffett. It will take the reader through the realisation that the thought process involved when buying shares in a company is no different to buying the company in its entirety. Beginning with how to assess the quality of a business, it will explain and illustrate with examples what to look for in company accounts, how to determine the value drivers of a business, the strength of its franchise and how to interpret key financial ratios and performance indicators. It will discuss the ideal characteristics of a business worthy of investment so that the reader will develop a mental checklist of what to look out for. Next, the book will set out a number of valuation methods to determine the likely economic worth of a company. It is against this estimate that a judgement can be made as to whether the share price offers good value. The book will conclude with thoughts on portfolio construction, in particular Focus Investing, where a concentrated approach is taken, and legitimate reasons for deciding to sell a holding.Throughout, the emphasis will be on the methodology used to manage the SDL UK Buffettology Fund.
Introduction: Towards an Investment Philosophy (An outline of the journey that led me to embrace this investment philosophy) Chapter 1: Business Perspective Investing (Investment -v- Speculation; Long-term -v- Short-term; what is Business Perspective Investing? Quality of Business criteria) Chapter 2: Growth is not always what it seems (How growth can drive and destroy value) Chapter 3: Profitability of Capital (Return on equity and capital employed; cost of capital) Chapter 4: Economic Value Added (The interaction of growth and profitability to create shareholder value; retained earnings and dividends) Chapter 5: Cash is King (The need for earnings to be reflected in free cash flow) Chapter 6: Predictability and Certainty (Knowing what the business will look like in 5, 10 or 20 years' time) Chapter 7: Ratio Analysis & Performance Indicators (Identifying trends and key issues from a study of the accounts over long periods of time) Chapter 8: Valuation (A review of various valuation methods; discounted free cash flow; margin of safety) Chapter 9: When to Sell (Legitimate reasons to say 'au revoir') Chapter 10: Synopsis (Summing it all up)
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