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Invest in low-risk, high-uncertainty businesses by (Mohnish Pabrai)

Think safe, boring incredibly successful business. “we see change as the enemy of investments…so we look for the absence of change. We don’t like to lose money. Capitalism is pretty brutal. We look for mundane products that everyone needs.” Warren Buffett Some examples of companies that have proven to be low-risk, high uncertainty businesses would […]

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SEARCH STRATEGY by Bruce Greenblatt

Look intelligently for value opportunities. You must have search strategies. Every time you sell stock, someone else is buying that security. Vast majority—95%–is selling because the stock will go down versus buying because the stock is going up. You seek a seller that is motivated by psychological imperatives other than the underlying value. One person […]

Psychological factors - valueandprices
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Psychological Factors by Bruce C. Greenwald

Greenwald sees three psychological factors that best explain why certain stocks become undervalued. Psychological Factors by Bruce C. Greenwald  First, as Buffett himself said, value stocks don’t tend to have big payoffs. Their success is incremental; you won’t strike it rich overnight. They are in every sense the opposite of lottery tickets. And people love lottery […]

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David Hume and Adam Smith, two men who refined the idea of the Enlightenment

David Hume and Adam Smith, two men who refined the idea of the Enlightenment The date of July 4, 1776, has other claims to fame, of course. But while Thomas Jefferson, John Adams, Benjamin Franklin and their fellow revolutionaries were meeting in Philadelphia to publish the Declaration of Independence and launch a new nation, across […]

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Charlie Munger on “Circle of Competence” (Learn Continuously)

Learn Continuously:  Read, Read, Read “You don’t have to pee on an electric fence to learn not to do it” said Munger on one occasion.  At the most recent Berkshire meeting he quipped: “Learning from other people’s mistakes is much more pleasant.  The best way to do this is simple:  When in doubt, read so […]

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Cheung’s market mood model

There are six phases of market mood in Cheung’s model: Normal— This is the base-building or consolidation phase where fundamentals are poor but stabilizing. Value investors are showing interest. Hypomania— Favorable news shocks hit the market, and prices break higher out of consolidation. Speculators, focused on short-term gains, begin buying. As the market continues higher, […]

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Keeping businesses or close the shop during recessions

Warren Buffett once said that one of the best ways not to lose money is to buy “good companies. The company has an understandable business. Essentially, the company has a history of producing strong earnings performance. We can show a company has an “understandable business” by verifying the following: The company has predictable and proven […]

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The Wisdom of Lord Keynes

Way back in 1925, John Maynard Keynes provided a wonderful insight on the role of speculation in shaping stock returns. Observing the predilection of investors to implicitly assume that the future will resemble the past, Keynes warned: “It is dangerous to apply to the future inductive arguments based on past experience unless we can distinguish […]