The Motley Fool Investment Guide: Third Edition: How the Fools Beat Wall Street's Wise Men and How You Can Too

There are plenty of factors to analyze when evaluating the strategic landscape for a company, but I focus on three key things. 1. Does the business have pricing power? 2. What’s the size of its market opportunity? 3. What’s the level of loyalty of its customer base?

“What would I have been willing to pay for that? What would I pay more for?” Other examples: • Would you pay more for Netflix? Netflix faces competition from Amazon, HBO, and other challengers, along with many international first-movers.

The successful investor Bernard Baruch was once asked at a party for some stock picks. Rather than share his favorite ticker, Baruch explained his simple methodology for finding winning investments—one I’ve embraced as well: Find companies whose product you buy, use, throw away, or however you’ve used it, you need to repurchase it within thirty day

Another reason to like small companies is that they are typically closely held by management. That means that the people running the company have a significant financial stake in the success not just of the company, but also of the stock itself. In fact, in many cases, the performance of the stock has a greater influence on the wealth of the manage

First, stop looking at earnings and start looking at cash flow. I would look at owner earnings: the cash generated by the business if it didn’t need to grow at all. It’s a steady-state level of cash flows for owners. The formula is simply after-tax net income, plus depreciation and amortization, minus maintenance capital expenditures (or what the c

Investing is ultimately a battle with your own behavior. No matter how much technical knowledge you accumulate, the odds are that you’ll have an unhappy investing experience unless you understand the behavioral biases we’re born with that, sadly, cause most investors to buy high, sell low, and earn subpar returns.

When you’re running a valuation, try to find out whether there’s something people misunderstand about a company—some clouds that are obscuring the long-term vision for those who aren’t patient enough to look out several years. That’s when you can find amazing long-term bargains.

LUDIC REASONING Coined by Nassim Taleb in The Black Swan, this is the belief that the real world can be predicted with mathematical models and forecasts. It leads people astray because models are purposely simplified, while the real world is incomprehensibly complex.

We’re now talking about the two biggest threats to your (or your family’s) long-term investment survival. Chasing Wealth, you may run headlong into a guillotine. But chasing Security is no less deadly a pursuit. In our first-ever issue of Ye Olde Printed Foole, we shared this contrarian line to which we still very much subscribe: “The least-mention