This involves buying and holding shares
in wonderful businesses that send some of their growing profit back to the shareholders.
One of the best things about a franchise is that there are so many
wonderful business owners across the country that you can learn from and share ideas.
Building a diversified portfolio full of high - quality dividend growth stocks allows you to have your cake via the equity in
numerous wonderful businesses.
Warren Buffett credits Charlie Munger for helping him see the benefits of buying
wonderful businesses at fair prices instead of fair businesses at wonderful prices.
My success simply hinges on my ability to
find wonderful businesses and buy equity positions in these businesses at attractive prices relative to their intrinsic value.
Strong profitability, a balance sheet that isn't overly leveraged (the interest coverage ratio is near 10), and a collection of
wonderful businesses make this what is, in my view, an excellent long - term investment candidate.
Creative people are often not gifted with
wonderful business acumen, but if someone tried to sell you a shoddy car with the promise that they would work on it, you would hopefully have the good sense to tell them to come back and show you when it is finished.
But I know that continuing to acquire equity in
wonderful businesses means my snowball will roll downhill at ever faster rates, and when / if a correction does come, the passive income my portfolio throws off will buy even more new shares than before.
The first source of return rarely gets mispriced, and the second hinges primarily on market conditions, but the third most often results from taking a long - term, business - focused mindset and investing
alongside wonderful businesses.
However the
rare wonderful business that's a balance sheet bargain can be especially rewarding if focused on for a very large investment
Warren Buffett credits Charlie Munger for helping him see the benefits of buying
wonderful businesses at fair prices instead of fair businesses at wonderful prices.
At the 1996 Berkshire Hathaway Annual Meeting, Warren Buffett said: «The main thing is to
find wonderful businesses, like Phil Carret, who's here today, always did.
«Forget what you know about buying fair businesses at wonderful prices; instead,
buy wonderful businesses at fair prices.»
Strong profitability, a balance sheet that isn't overly leveraged (the interest coverage ratio is near 10), and a collection of
wonderful businesses make this what is, in my view, an excellent long - term investment candidate.
Syposz says, «We're just steps from the water and surrounded by local shops
with wonderful business owners, which attracts plenty of foot traffic,» Syposz says.
What I'm not doing though is buying at a P / E of 20 and expecting the stock to one day trade at a P / E of 40 — even though, I know, there may come a time where Mr. Market gets overexcited with this kind
of wonderful business and really does give it a P / E of 40.
But it doesn't do much beyond that for someone looking to achieve financial independence via passive income, other than to serve as something to exchange for equity
in wonderful businesses at fair or better values.
You may have
a wonderful business idea that you have perfected, but it won't mean much if you don't have the funding in place to not only make your business happen, but allow it to succeed.
In 1997, Buffett responded to an email from a close friend, former Microsoft executive Jeff Raikes, that read, «Doesn't Microsoft meet all your tests for
a wonderful business.»
While they aren't as good as
a wonderful business bought at a fair price, it's still an important lesson.
You find
a wonderful business that is destined for tremendous growth and hold on for dear life as you go along for the ride.