Wednesday, January 18, 2006

Buy Like Buffett

Here’s an investing mind-set to adopt: think like a corporate acquirer. In other words, even if you’re only picking up a few shares, pretend you're buying the entire company. Such discipline forces you to contemplate important fundamental and conceptual items before pulling the trigger on a trade.

One pro to emulate with this type of investment strategy is Warren E. Buffett, chairman of Berkshire Hathaway. In the company’s 2004 annual report, Buffett lists his acquisition criteria--among them, $75 million or more in pretax profits, consistent earnings power, good return on equity with a light debt load, management in place and “simple” (not too technological) businesses.

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