Warren Buffett is the king of investing and he is the one who has made value investing famous.  He has a knack for finding diamonds in the ruff companies who have inherent value that are undervalued by the market.  He is the one who has brought sensibility to the markets time and again.  And he has saved many investors from falling into the trap of wanting to make short term gains in exchange for long term investing.

Here are a couple of investing tips from the Oracle of Omaha.  These are simple pieces of advice taken from the greatest value investor of our time.  These may sound really simple, but remember it has brought at least one man exponential returns over time.  It will sound like stock market 101 but so many investors disregard these principles.

First of all, understand the business you are investing in.  Too many investors buy stocks purely on it’s share price, or some other market valuation.  The market isn’t always right.  Very rarely will an investor actually go in and do research on a company before he invests.  This is vitally important for any trader or investor.

Take Buffett for example.  He reads tons of annual reports every year and that is how he finds his deals.  In fact, he often tells of when he first got starting in this business how he read through Standard & Poor’s directory of companies several times to find good companies to invest in.

Secondly, do your own business valuation.  Buffett does his own and only then does he go and look at what the market cap is.  If the market value is below what he thinks the business is worth, he goes in for the kill.  Otherwise, he stays out.

It doesn’t make much sense to invest in a company that you haven’t valued.  That is going in blind, usually following a trend or a fad.  This might be a good stock investment strategy for a day trader, but for a long term investor, you should know what a company is worth or at least have some idea.

Again, very simple advice, but so often ignored.  It is difficult to valuate a company, but you should learn how to do it and then do it.  It’s not an exact science but you can learn to do it.

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