Say you’ve got an old-school punch card. An all-summer amusement park pass for the kids. Or a loyalty card, offering up good prices on a spectrum of attractive goods and services over the course of a year.
But there are a few rules.
You can only buy one card, for a set price. Moreover, each ride–product or service–is worth a different number of points: Some cost more than others. Plus, you don’t get unlimited options. You only get 20 available punch-spots. Once the last one is punched, that’s it: You’re spent out.
Wouldn’t you think more carefully about which ride–or which service or product–offered the biggest bang for the buck–if you knew you only had 20 choices to make?
We look at investing through the lens of “punch card theory,” Warren Buffett’s term. That is, if we could make 20 investments in life, which extant holdings should stay? Which should be tossed? Which should be picked up instead?
The Punch Card Investor proffers a basic equation: Discipline + Analysis = Best Value Investment Opportunity.
That is, we believe it’s sound investment analysis to take the long view of businesses’ performance, equip ourselves with extensive research–to the extent that we can affirm, without hesitation: “Right now, we can say with confidence that this is the best place to invest your–and our–money.”
We believe that tracking stock price movements at warp-speed Wall Street time, however, is not sound investment analysis. No one sums up the theorem better than Buffet himself:
“If we have good long-term expectations, short-term price changes are meaningless for us except to the extent they offer us an opportunity to increase our ownership at an attractive price.” — Warren Buffett
So, how do we solve our own equation?
Our 7 Punch Card Principles >>>