Growing Rich - Arabictrader.com

GROWING RICH WITH GROWTH STOCKS
and often does,” Yacktman emphasizes. “In that case, you’ve got to
say, ‘Yes, I understand there’s a problem right now. But, on a normalized
basis, this situation really doesn’t exist.”
PREPARING YOUR SHOPPING LIST
Robert Stovall loves to buy quality businesses when they are under
temporary pressure. “This is the only time a company is ‘for sale’ at
a bargain price,” he says. “Sometimes it’s an entire industry that’s
under a cloud for some reason. The essence of Warren Buffett’s
thinking is that the business world is divided into two groups. The
first group consists of a small number of wonderful businesses that
are well worth investing in at a price. The second group is full of
mediocre or bad businesses that from time to time become attractively
priced, but are generally not worth owning because they are not good,
long-term holdings. This second group, in Buffett’s opinion, consists
mostly of mature companies that make up the Dow Jones Industrial
Average.”
CHARACTERISTICS OF A GOOD BUSINESS
According to Buffett, Stovall, Yacktman, and everyone else in this
book, a good or wonderful business has at least a majority of the
following characteristics:
• It earns a high return on capital without accounting gimmicks or
a lot of leverage.
• It generates cash profits.
• It posts predictable earnings.
• It is not a natural target of regulation.
• It is led by owner-oriented management.
• It follows an understandable business model.
• It owns strong franchises, thus having the freedom to successfully
raise prices when necessary.
“A good business is one with a high return on tangible assets,”
Yacktman says. “In other words, it must be profitable. I like businesses
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