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Hello and welcome to the hamster wheel channel! My name is Christian again, and as always, this is about the stock market, finance, and our value investing. As I mentioned last time, today we're actually going to take a look at the strategies of Charlie Manga and Warren Buffett. The best part is, we don't have to figure it out ourselves or try to force it.
We simply listen to Charlie Manga explain it. If you're a regular visitor to my site, this video might be just what you're looking for. It contains a lot of informative and important knowledge that even private investors can easily implement and apply in practice. We'll then look at what Charlie Manga has to say about his strategy.
After that, we'll also take a look at the Berkshire Hathaway annual report, which details the acquisition criteria these two gentlemen use for their investments. They've documented this perfectly. I 've also prepared some information here on my computer. Now, let's just watch a fun Charlie Munger interview together.
It was a classic Charlie Munger manga interview; if any of you have seen more of his interviews, you'll know what I mean. He usually takes the opportunity to throw in a few jabs at the financial industry and financial stocks. He also said that the reason they do things differently is that it's too easy for them.
And this approach isn't taught anywhere in business schools or universities because otherwise, they wouldn't need to be taught at all. That's what we'll be covering for the rest of the semester, because it's explained relatively quickly here. And that's obviously what Charlie Munger likes to do. But now we'll take a closer look at what he actually said, and then at what other purchasing criteria play a role for Berkshire Hathaway when it comes to companies.
Because that 's what they've been pursuing as a strategy for the past two years, and that's what we want to examine more closely in this course. As a first step, he said that they want to understand the company. That's logical, isn't it, because they're buying a stake in the company, not... Speculation objects and therefore want to understand exactly what's going on, and it 's kind of clear if you don't know exactly what you're buying because you don't understand it, then you can't possibly make this assessment.
You can say something about any topic, but if you don't take action, then we all have to... then maybe not much productive stuff will come of it. So, the two probably have a sustainable competitive advantage, meaning something that is a company characteristic that protects the company from the competition and from other things, and that's what was so important, and how you can recognize and prove that this is already the case, more on that later, but they want to have something to sit on, that the company has a sustainable competitive advantage, the two want a talented management team, our mistakes...
that is, there's this quote from Warren Buffett who said he prefers to buy companies that can also have bad managers because at some point that's exactly what will happen. That's basically true, but nevertheless, you need good management in a company, otherwise, as we know from four companies, mismanagement will occur, they line their own pockets, and I think...
In the long term, it doesn't matter how good the entrepreneurs were if the management drives the company into the ground or, for example, only lines their own pockets. Thinking in the short term, then at the end of the day, it's not a good investment. Therefore, the company must have good management.
How can you recognize this? How does the management perform, or other things? Samsung, the high-flyer, will be discussed in more detail later. Next, the price must make sense and include a safety margin or buffer, called a margin of safety management GmbH. This is logical because something can always happen that you haven't planned for.
Therefore, the price must first reflect the return that both parties want. It must also include a margin of safety in case of miscalculations or unforeseen events. That's the strategy he just explained. And let's look at what they wrote in the Berkshire Hathaway company report. These are actually purchase criteria for companies, and they must state a certain size.
They have 570 million to lose, and the people writing here need to win if the company doesn't achieve that. Of course, the mix is clearly different if they buy up small companies with their billions; the money wo n't be put under any pressure. That's why, for now, they're looking for very small companies.
Of course, it might look different for us, but they're only interested in larger companies for now. Next, they want a company that has proven in the past to generate sustainable profits. And I'm even actively writing about future forecasts here. They don't care about future forecasts at all. They just want to know if the company has earned a lot in the past, and that's always the case, not whether it might be a turnaround candidate in the future.
That means they'll certainly consider whether the company has a positive future, but they're not going to buy companies just because there's a positive analyst assessment or something. Classic turnaround candidates are completely out of the question, and that's why they're not buying companies like Tesla or anything that have never made a profit.
They're only interested in companies that have already shown in the past that they can achieve results. Next, a very important point, which we will examine in more detail later, is that the company must have a high return on equity and very low or even no debt. According to Warren Buffett, equity is the most important key performance indicator of all, and we will look at why it is so important to find a company with high returns on capital, for example, the return on equity, and little to no debt.
As already mentioned, management must be simple, and the company must be straightforward. This means we need to understand that... It goes even further. If you do n't understand this through the lens of... and the margin must also be appropriate, it 's not worth it. It's actually quite well explained there.
So, we have now seen, so to speak, the points written down in plain English. What does this mean? The strategy consists of a simple, understandable business model, a competitive advantage, management, and price. These are the things we will later examine step by step in terms of risk, so that we understand exactly why.
This is so important, and how you can recognize such things, and other purchasing criteria are also known, namely, as I just read, high equity and low debt, and we will also take a close look at this, why it is important, and why companies that have exactly these characteristics have such a big advantage over other companies, namely a crucial point, and that should be all for today.
I just wanted to introduce the investment strategy so you get a feel for what to expect in the next videos. So we will look at these points in more detail and then also see how we can put everything into practice. That's all for today, see you soon, a Christian Konrad channel
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