“Buy a Wonderful Company at a bargain price” - Warren Buffett
Stock Investing is as simple as that or as complex as that
depending on if you are the person by name Warren Buffett. So how do you define
the “Wonderful Company” ? According to Mr.Buffett, a Wonderful company is one that
yields highest Return On Capital, Year After Year.
Return On Capital is nothing but the Equivalent of Return On
Investment. It is computed as following;
Return
On Capital = Net Profit + Interest Charges
Equity Capital + Debt Capital
Once you have computed the return On capital for atleast the
past 5 years, the next question that would pop-up in your mind is How much return on capital is good enough?
My personal opinion is it should be something at-least 5 -10% more than what the Bank Fixed deposits
yield to justify the risk involved in Stock Investment.
So what are you waiting for ?Start identifying the “Wonderful
Companies” out there…to buy it or not though is altogether a different story