4

CHAPTER

Establish a Sound

Investment Philosophy

THE FIRST ELEMENT

Value investing is actually a comprehensive investment philosophy

that emphasizes the need to perform in - depth fundamental analysis,

pursue long - term investment results, limit risk, and resist crowd

psychology.

— Seth Klarman

The vast majority of information about any particular investment

is merely noise. Successful businesses usually are identifi ed by a

handful of meaningful variables or data points; everything else is

secondary to the success or failure of the business. Warren Buffett

has often remarked that he never uses a spreadsheet or calculator

when making investment decisions. It is also true that Buffett has

a gifted mind for numbers and remembering data. The point is

not against the use of spreadsheets (or a calculator). Spreadsheets

and calculators are tools that can add value to any analysis. The

point is that elaborate spreadsheets with hundreds of formulas and

ratios have so many built - in assumptions that most likely offer no

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