How You Can Invest Like Warren Buffett

Warren Buffett can do lots of things that you or I cannot do. Most of us cannot offer $5 Billion cash to Goldman Sachs in their hour of need. But lots of us can apply many of Buffett's basic principles for stock investing. I am writing this from the perspective of a dividend growth investor, which is what I am, but these principles can be applied by anyone who takes a value approach to investing and tries to be businesslike about it.

Berkshire Hathaway (BRK.A) (BRK.B) recently sent out its 2013 Shareholder Letter, which is Buffett speaking. I was struck this year by how several passages are directly applicable to individual self-directed investors. Buffett does not invest on wishful thinking. He analyzes businesses as they are, projects earnings for the foreseeable future, values each company, and decides whether its future earnings power is a good deal for what he can buy the stock for. Small investors can do this too. He never tries to identify back-room synergies. Small investors are forced to be in the same situation: You will never be able to impose synergies or operational efficiencies on your companies. He doesn't try to, and you cannot. He prefers to buy companies that have managers that will come with the business. Obviously, when you buy shares in a company, you are also taking the management team along with your stake.

Source: Seeking Alpha

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