Would I be willing to invest a large part of my net worth into this business? 5. Is the business priced at a large discount to its intrinsic value today and in two to three years? Over 50 percent? 4. Do I know the intrinsic value of the business today and, with a high degree of confidence, how it is likely to change over the next few years? 3. Is it a business I understand very well-squarely within my circle of competence? 2. Always seek out businesses run by people who have demonstrated their ability to repeatedly lift and scale. In seeking to make investments in the public equity markets, ignore the innovators. Innovation is a crapshoot, but investing in businesses that are simply good copycats and adopting innovations created elsewhere rules the world.

Invest in the copycats rather than the innovators.

Invest in low-risk, high-uncertainty businesses.

My own experience as a professional investor over the past seven years has been that the vast majority of gaps close in under 18 months. Whenever I make investments, I assume that the gap is highly likely to close in three years or less. Make sure that you are buying a business for way less than you think it is conservatively worthĭhandho journeys have always been all about the minimization of risk. The critical question is: How long is the spread likely to last and how wide is the moat? I adjust for this by simply placing bets at 10 percent of assets for each bet.

Few bets, big bets, and infrequent bets.

We are best off never calculating a discounted cash flow stream for longer than 10 years or expecting a sale in year 10 to be at anything greater than 15 times cash flows at that time (plus any excess capital in the business).

Invest in businesses with durable moats.

Invest in distressed businesses in distressed industries.(Rate of change of industry is very slow)

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