Invest Like a Guru

Adopt the investment strategy that built Warren Buffett's fortune

Invest Like a Guru provides an invaluable resource for high-quality-focused value investing, with expert insight and practical tools for implementation. Written by the man behind GuruFocus.com, this book expands on the site's value strategies and research tools to provide a primer for those exploring pathways to higher returns at lower risk. The book begins with an insightful explanation of high-quality-focused value investing concepts, then quickly moves into practical, detailed guidance on analysis, valuation, key factors, and risks to avoid. Case studies demonstrate real-world application of various analysis methods, and the discussion walks you through important calculations using real examples. Author Charlie Tian draws upon his own experiences and lessons learned to provide true insight on high-quality-focused value investing as a strategy, providing both reference and expert advice in this singularly useful guide.

Warren Buffett once said, "I would rather buy good companies at fair prices than buy fair companies at good prices." That's how he built his fortune, and his method is what we now call high-quality-focused value investing. This book shows you how to determine what constitutes "good companies" and "fair prices," with practical tools for real-world application.

• Learn the principles and concepts of high-quality-focused value investing
• Understand the analysis process and valuation of prospective investments
• Avoid the value traps that can trigger permanent losses
• Study clear examples of key ratios and calculations

We can't all become the next Warren Buffett, but we can boost returns while reducing risk using the right investment strategy. High-quality-focused value investing provides a path to profit, and Invest Like a Guru is the one-of-a-kind guidebook for getting on track.

Acknowledgments ix

Introduction xi

Chapter 1 The Gurus 1

Chapter 2 Deep-Value Investing and Its Inherent Problems 24

Chapter 3 Buy Only Good Companies! 38

Chapter 4 Again, Buy Only Good Companies— and Know Where to Find Them 62

Chapter 5 Buy Good Companies at Fair Prices 80

Chapter 6 Buy Good Companies: The Checklist 101

Chapter 7 Failures, Errors, and Value Traps 115

Chapter 8 Passive Portfolios, Cash Level, and Performance 132

Chapter 9 How to Evaluate Companies 142

Chapter 10 Market Cycles and Valuations 168

Epilogue 181

Notes 183

About the Author 190

Index 191

Charlie Tian, PhD, is the founder and CEO of the value-investing website GuruFocus.com. He is the creator of the website's value screeners, strategies, and research tools, which are used by more than half a million investors monthly, as well as professors and students from more than 100 universities worldwide.

The legendary value investor Warren Buffett is widely quoted as saying, "I would rather buy good companies at fair prices than buy fair companies at good prices." That simple rule of thumb built him a fortune and is now known as high-quality value investing. The fundamental key to amassing wealth with this type of investment strategy is to accurately measure price and quality, and Invest Like a Guru is your single-source solution to doing both.

Written by the founder and leading force behind GuruFocus.com, Charlie Tian, this groundbreaking guidebook puts the wealth-creation potential of high-quality value investing into the hands of investors with all levels of experience. With the same straightforward and accessible explanations that draw thousands of new users to GuruFocus each month, this step-by-step road map takes you through the ins and outs of determining if a company is a good investment and assessing a reasonable market price. The entire first section shows you where to look for companies with potential for high returns with minimal risk. It demonstrates how common publicly available business reports can shed a revealing light on the true health of a company, with specific advice for identifying signs of possible problems and promising breakouts. Illustrative examples from both research and firsthand practice clarify how the concepts and principles play out in the real world so you can implement them with confidence. Whether you're new to managing assets or need to upgrade your current strategy, this single resource sets you up for continuous success by giving you:

• Hands-on tools and convenient checklists for streamlining your company assessments and valuations
• Profit-maximizing guidance for avoiding costly mistakes, digging up unseen signs of failure, and keeping out of value traps
• A complete primer and operator's manual to the high-quality value investing strategy used all over the world to collect dependable returns on investment over time

Only fit companies can deliver sustainable healthy returns, and you can find them all with Invest Like a Guru.

Praise for Invest Like a Guru

"Charlie Tian has provided in Invest Like a Guru a valued checklist that derives lessons from a lifetime spent observing great investors at work. Dr. Tian provides tools that show how paying fair prices for businesses capable of reinvestment at high rates of return over time provides tax-advantaged, long-term compound investment returns."
—Thomas A. Russo, Managing Member, Gardner Russo & Gardner LLC

"Invest Like a Guru is a valuable resource for any aspiring stock picker, and an engaging read for novice and seasoned investors alike. Charlie Tian skillfully dissects the methods of legends like Warren Buffett and Peter Lynch, as well as those of lesser-known but equally successful figures."
—Scott Fearon, author of Dead Companies Walking: How a Hedge Fund Manager Finds Opportunity in Unexpected Places

"If you want to invest like a guru, read this book. It is full of insights and reminders of dos and don'ts."
—Vitaliy N. Katsenelson, CIO, Investment Management Associates, Inc., and author of The Little Book of Sideways Markets

"Dr. Tian has read everything the best value investors have written and packaged this sage wisdom in Invest Like a Guru. Aspiring value investors should read it!"
—Wesley R. Gray, PhD, CEO, Alpha Architect, and coauthor of Quantitative Value