A number of years ago, Warren Buffett was before an audience of high school students in Omaha, Nebraska to offer advice and do a question and answer session. The video is on You Tube and similar to many talks – the best insights come from the question and answer session.

In his opening remarks: he offered the students: his company focuses on 3 things when hiring – integrity, intelligence and energy. It is generally accepted the candidates will have the last two, the harder one is integrity, but it is a habit and everyone has the ability to constantly do. If you have it you will be able to like yourself and use your individual remarkable talent.

The second advice is as you go through life try to build up savings and avoid credit cards or use them sparingly. As an owner of company that issues credit cards, Mr. Buffett says it is a great business. If you are on the other side, if you ever get behind given the high interest rates, it is very tough to get ahead. Not impossible but your life will have fewer choices. It is better to wait till you can buy without credit.

In terms of investing:

Mr. Buffett prefers company’s that have built in moats around their businesses. This means there is a predictability of sustainability of competitive advantage. In other words, if you project into the future and ask why does this company have an advantage over the competition for the next 10 to 15 years? Mr.Buffett gave the example of chocolate bars: what is the number one selling chocolate bar for the past year? 10 years? do you think it will change?  Chewing gum has the same predictability.

If you can not determine what should be the competitive advantage in 10 years, try to directly avoid the industry.

To do the above you need discipline and you have the ability to wait until you get the price that you have determine you are willing to pay. If you can wait a couple of years, then you wait. In the meantime you build up a cash ready position.

When you buy, you swing for the fences or buy as much as possible and then wait till the market and your stock prices go up prices because of the nature of the company’s advantages.

Mr. Buffett prefers things that he understands or knows what I know and knows what I do not know. It is also called a circle of competence. It does not mean you are not interested in others things, but you know what you are good at and rely on others for what you are not good at. Note Mr. Buffett has a partner, he does not work alone.

Mr. Buffett believes in feedback – every time you buy something you write down why you are buying it? and review it every 6 months. You bought the stock to pay you consistent dividends? have they?

Remember when you buy a stock you are buying a piece of the business and similar to buying any business or assets, you need to determine if you are getting a good price. Be willing to walk away, until you do get your price.

Linking to dividend paying companies, one of the keys to Mr. Buffett’s success is he has been a large buyer when markets go down. He has the advantage of owning an insurance company which generates cash. When markets go down, Mr. Buffett can increase his holdings in companies because he has done his research which has lead to reasons the stocks expectations to go up in price. The companies are leaders in their industries? the company’s products are best, so no matter the economy it is worth buying? if there is a definite competitive advantage then the shares are expected to increase as the market goes through one of its cycles. It other words, be a big buyer of quality companies when markets go down and wait, a good piece of advice is while you wait collect the dividend.

There are more questions than answers, till the next time – to raising questions.