On your mark. Get set. Go! (The Financial Athlete #58)

Can smart investing criteria for stocks be as simple as 1-2-3? Yes, but remember, simple is not necessarily easy.

On your mark…

Imagine starting blocks not aligned with the finish line. No One runner runs parallel to the finish line, while another runs in the opposite direction, and another runs diagonally. runners cross the finish line! This ridiculous scenario illustrates why so many investments go wrong: the starting block was not properly aligned with the finish line. .

For right alignment for stocks, choose only companies with a dominant market share not threatened by competitors. Warren Buffett calls this a “wide economic moat”.

For real estate, be selective with location. To limit your selection to desirable areas, you begin the investment process with a good exit strategy.

Get set…

Of the above companies, choose only those which are well-capitalized. Look at net cash (cash and cash equivalents — short-term and long-term debt). Compare net cash to capitalization (equity + debt). Examine the quality of earnings, plus operating and free cash flow.

As for real estate investments, narrow the search to properties with a steady stream of positive cash flow.

Go!

Be patient to buy stocks and real estate when the market price is at a discount to intrinsic value. Benjamin Graham called this a “margin of safety”.

“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price”. – Warren Buffett

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