The four M's of investing were coined by Warren Buffett and further employed by numerous other top investors including my mentor, Phil Town.
The 4 M's are Margin of Safety, Meaning, Moat, and Management.
CLICK HERE to download the 4 M's Investment Worksheet. This worksheet will help you increase your investing skills.
MOS (Margin of Safety)
MOS is the foundation of Value stock investing. As discussed in the previous email, value stock investing is the strategy of buying ON SALE stocks that are a significant discount off the intrinsic value. This is essentially what TYKR does for you automatically. In fact, it goes a step further by adding a point system (0 – 20) to the stock. The higher the points, the less risk.
The meaning requires some business acumen. Do you understand the business? Do you understand the industry? Do you understand the sector? Warren Buffett has stated that an investor should never invest in a business they don’t understand. In my case, I would say I'm very knowledgeable with tech stocks, having over 15 years experience in software engineering. On the other hand, I know very little about pharmaceutical stocks. In this case, I avoid pharmaceuticals. As you can see, I only invest in businesses I know.
The moat also requires some business acumen. Is the business easy or hard to duplicate? Does this business have a lot of cash on hand? Does this business have a strong brand moat (Coke, Visa, and Apple are strong brands). A business that is hard to duplicate and has low competition is typically a wise investment. In other words, it has a wide moat.
The management requires you to be a good judge of character. If you are someone with high integrity and character, you can usually see through the BS pretty quickly and understand someone's true intentions. Some key identifiers to pay attention to... Does the CEO take blame for mistakes or do they point fingers? Does the CEO cause drama on social media or do they remain relatively quiet? Does the CEO make wise decisions or poor decisions? A good leader owns their mistakes, has high integrity, and makes great decisions for their customers and shareholders (you and I). An investor should invest in businesses that are run by great leaders.
If you find a stock in TYKR that is ON SALE, you understand the business (Meaning), you see that it is hard to duplicate (Moat), and is run by leaders with strong character (Management), then you truly have found yourself a wise investment.
Overall, TYKR helps you save a lot of time but a great investor looks past the stock and looks at the business. Get really good at the 4 M's and you can become a great investor.