SECRETS OF WARREN BUFFETT'S SUCCESS

This "Financial Focus" column is prepared by Edward Jones Investments, headquartered in St. Louis. Jones includes branches throughout the nation, including Cape Girardeau and Jackson.

Attention, all Warren Buffett fans: You can read about this financial guru's investing strategies in the book, "Buffettology: The Previously Unexplained Techniques That Have Made Warren Buffett the World's Most Famous Investor." Written by Mary Buffett and David Clark, the book contains interesting and insightful information.

Buffett's investing philosophy corresponds with that of Benjamin Graham. Graham's financial text, "The Intelligent Investor," is probably the best investing logic between two covers. Buffett has used Graham's philosophies to achieve remarkable success.

Here's what Buffett looks for before he buys:

1. Industry leaders that market essential products. He likes companies with almost a monopoly on consumer loyalty.

2. Strong companies that consistently beat the stock market's long-term annual return of 10 percent.

3. Aggressive companies that seek new opportunities and use earnings to expand.

4. Sound companies that are conservatively financed.

5. Consistent companies with histories of steadily increasing earnings.

6. Value companies selling at discounted prices because the general public thinks their best days are over. For example, Buffett bought Coca-Cola at a bargain price in the 1970s when investors thought it had lost its appeal.

If this sounds like a lot of work and research, it is. Buffett takes a long time to buy part of a company, but when he does, he buys a lot, and he buys for the long term.

Buffett invests in remarkably few companies for a billionaire investor. He is secure enough in his selections (and strong enough in assets) that he's willing to take major positions with the plan of owning his investments for years, if not a lifetime.

Buffett also likes companies that pay few dividends, because receiving dividends means paying taxes. Buffett prefers companies that use profits for growth rather than dividends. This tax philosophy is said to have contributed to about 40 percent of Buffett's amazing returns. His Berkshire Hathaway has compounded at 23 percent annually. Had it paid dividends instead of reinvesting for capital growth, the return would have been less than 16 percent.

Buffettology might fly with a billionaire, but most investors require more diversification along with a few dividends. However, his ideas on what makes a good stock investment can be helpful to everyone. "Buffettology" makes interesting reading that might even provide a few pointers along the way.

The Southeast Missourian does not recommend that readers buy or sell stocks featured in this column, which is provided for informational purposes only.