Please find below our key points from Google talk of one of the best value investor "Bill Nygren" (Emphasis ours). Bill Nygren has been a manager of the Oakmark Select Fund since 1996. Mr. Nygren has received many accolades during his investment career, including being named Morningstar’s Domestic Stock Manager of the Year for 2001.
We think the risk and reward have to be in balance to make something interesting. You can’t go into a high risk situation for a small reward.
What worked 20 years ago isn’t working now anymore. As information becomes more easily accessible it loses its value.
If you want to invest capital at no risk for a specific amount of time then you should buy G-sec (government securities).
If you take the risk then you need to earn a premium for that, like for example if one is getting 4% return with no risk by investing in G-sec and he decides to take some risk and invest that money in equity markets then he must earn equity risk premium on that. For example: While forecasting companies financials (in valuation) you are coming to conclusion that I would be exiting this stock at X multiple and the return which you would have generated while you were holding that stock is equal to or lesser than G-sec return then you should avoid investing in such companies as you are taking more risk which isn’t providing you lucrative return.
The best practice one can do before buying a stock is to go to the person or list down all the negative things which can go wrong in that company and then think rationally whether to invest in that stock or not?
Whenever fundamentals of the company are deviating then try to get out of that company as soon as possible.
Reading plays a key role in successful investing so try to read as much as you can about the company you are invested in, about the competitors, about the companies in your watchlist.
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