Microsofts CFO is very good at this and asresult it has been impossible to buy

Microsofts cfo is very good at this and asresult it

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of doing the business. Microsoft’s CFO is very good at this, and as a result, it has been impossible to buy Microsoft on sale. In March 2009, I had MSFT valued at $21. The price was $15, just below the 80 percent MOS. The Payback Time was six years. It had a Payback Time with zero growth of nine years. This was the first time in forever that MSFT had been close to buyable. Yes, it’s a tech stock, but nine years? I was so tempted. Except I use Apple, so I didn’t pull the trigger and buy it. By October, it was at $26. And I said these words: “I knew it!” These are words every investor must get used to saying. Go practice in front of the mirror. For more about tech stocks, see my website. Okay. You’ve been patient, you’ve done your homework, you’ve adjusted the price for any major changes in the fundamentals. Now your business is finally on sale. Now whatchagonnado? STEP FOUR: BUY IT
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When the price is where you want it, you buy it. Decide how much of your available capital you want in this one business. While the mega-rich usually make their money by focusing on one business, they’re usually insiders who have a great deal to do with the long-term success of that business. We want to have some diversification but not much. As you’ll see in Step Five, there’s a lot to keep up with when you own a business. The more businesses you own, the more you have to do to stay informed. If you have too many, you’ll start to make mistakes and lose money because you aren’t on top of things. The right number of businesses for you depends on how much time you have to keep up with the business and how much money you have to invest. With a small amount of capital, you can own more than one business, but I don’t encourage you to do so. If you’re stockpiling several businesses with a small amount of capital, the commissions on your purchases are going to be a significant expense. You need at least $10,000 to begin to diversify, and I’d recommend you wait until you have $20,000 before you actually buy the second business. To put this into perspective, the investor who runs GEICO’s $2 billion fund owns eight stocks. Warren Buffett and Charlie Munger said that in the early days, when they were only working with a few hundred million, they would buy five stocks, with their biggest position being about 25 percent in one. The author of The Little Book That Beats the Market , Joel Greenblatt, boasts a ten-year 50 percent compounded rate of return on several billion dollars and, last time I checked his portfolio, owns two stocks. Eddie Lampert, with a multibillion-dollar portfolio at ESL Investments, has a 29 percent twenty-year compounded return and owns eight stocks. Great investors focus. You should, too.
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This chart shows the amount of capital you should have before you move to the next business. The third column is the percentage of your total capital you expect to invest in your initial buy of that business. For example, if you have $10,000 you want to invest in a business, your initial buy will be with about $2,500. If you have $10,000 right now and expect to add from an outside source of capital $1,000 a month to your
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  • Spring '20
  • Warren Buffett

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