Qala

1. The business must be simple in nature and understandable, have a steady
operating history and good long-term potential.

2. The business should have excellent “economic goodwill” or reputation, which
are generally well-respected and large companies.

3. Management should be rational and honest with shareholders.

4. Concentrate on the company’s “return on equity” instead of earnings per
share, since earnings can be manipulated by accounting. Companies with high
profit margins and cash flow are preferred as it allows for growth.

5. Determine the intrinsic value of a business and try to pay less for it. By doing
so, you create a “margin of safety” just in case you pay too much.

6. Disregard what is happening in the stock markets as it has no impact on the
business of the company.

7. Sell a company when (1) its intrinsic value is not appreciating at a
satisfactory rate; (2) market value of company is much greater than the
estimated intrinsic value; and (3) cash is needed for a superior investment.