« The Little Book That Makes You Rich! | Main | The "Zealots" Have It Wrong »

Rule #1

A friend passed a book on to me this past weekend. Phil Town’s Rule #1. For the uninitiated, “Rule #1” is a reference to Warren Buffett’s first rule of investing which is “Don’t lose money”. Using Buffett’s rule (and investment process) Town transformed himself from a beef jerky eating, river canoeing, rattle snake wrestling adventure tour guide to a book writing, public speaking, millionaire blogger. I’ll reserve comment on whether or not I think the book is a read since I just sort of skimmed it. But I was able to ferret out the punch line – following Buffett’s Rule #1 will lead to superior returns.

Town suggests that the way to adhere to Buffett’s first rule is to look at five different things about a company. They are:

  • return on invested capital (ROIC),
  • revenue growth,
  • earnings per share (EPS) growth,
  • equity (or book value) growth, and
  • free cash flow growth.

He says that we should be looking for companies with at least 10 years of history, and except no less than 10% per year in each of the growth figures. We should also look for companies with an ROIC of at least 10% as well.

Sounds reasonable. I thought it’d be interesting to take a few companies on our watch list (perhaps some in our portfolios) through the Rule #1 paces. So I’ll be doing that over the next few days and posting the results here. Stay tuned.

 Subscribe by: Email or RSS | Email this Email | Print This Print |


TrackBack URL for this entry:

Subscribe with: 

Subscribe in a readerSubscribe By Email:
-- subscribe to get updated headlines and full length posts delivered right to your email address.

or subscribe by:

Reader | RSS

About Brick Financial Management, LLC

Blogged by Brick Financial

51 JFK Pkwy, 1st Fl. West
Short Hills, NJ 07078
Email Us

Brick Financial Management, LLC is a Registered Investment Advisor specializing in providing investment management services to individuals, families, organizations and institutions. We implement highly focused stock, bond, and balanced portfolios using an investment approach commonly referred to as value investing. Disclosure


ShareThis -- ShareThis lets you instantly access all of your profiles, blogs, friends, and contacts for easy sharing and updating on sites like Digg, Delicious, Reddit, Facebook and MySpace. For more about ShareThis, click here.

Digg! Digg -- submit this item to be shared and voted on by the digg community. For more about digg, click here.

Delicious Del.icio.us -- mark an item as a favorite to access later or share with the del.icio.us community. For more about del.icio.us, click here.

Facebook Facebook -- share an item with users of Facebook, a collection of school, company and regional social networks. For more about Facebook, click here.

Ben's Latest Tweet

    Follow Ben on Twitter