Warren Buffet Qs Flashcards
General rules
Always ask investor or business goals
Always ask if there are any constraints, limitations, time horizons or any other limiting factors
Let’s say you had $10 million to invest in anything. What would you do with it?
Ask for investor goals:
big capital gains over 20-40 years?- well-diversified portfolio
tax free retirement income - municipal bonds
What type of assets interest them?
If you owned a small business and were approached by a larger company about an acquisition, how would you think about the offer, and how would you make a decision on what to do?
There’s a lot more to it but main terms to consider are:
1. Price
2. Form of payment, cash stock or debt
3. Future plans for the company compared to own plans
We do most of our work with technology companies. Can you talk about a trend or company in the industry that has piqued your interest lately?
DONT:
1. Describe something not recent or relevant
2. Not explain the WHY
3. Not explain the impact on the market as whole
Let’s say you could start any type of business you wanted, and you had $1 million in initial funds. What would you do?
Ask some follow ups
- would start a sustainable tech company, focused on developing AI-driven energy management systems for homes and businesses, helping optimise electricity usage and reduce energy costs
- tap into growing demand for energy efficiency in cost of living issues and sustainability on the regulatory sides
- i would invest in product development heavily, as well as marketing and sales, operations, working capital and some consulting/ partnerships.
Can you talk about a company you admire and what makes them attractive to you?
Uber
- talk about qualities which INVESTORS would find appealing
Let’s assume you are going to start a laundry machine business. How would you analyze whether it’s viable?
Profit?
- start by looking at location, footfall, nearby apartments with laundry services, etc
- project revenue by how many customers, how much they pay, how frequent.
- project expenses, biggest would be upfront construction and purchase of infrastructure, but also maintenance as well as hiring costs.
Tell me about an M&A deal that interested you recently
Adobe and Figma
Pitch me a stock
- Name and summarise what the company does
- Give a brief overview of its financials to indicate size and profitability
- State how its undervalued or more attractive than rivals, due to competitive advantages
- Say how there is a long term trend in its favour
- Talk about how the next 5-10 years will be really good for the company.
Can you explain to me, in simple terms, the subprime crisis?
In simple terms, banks made mortgage loans to people who were in no position to pay them off, or even meet monthly payments
- since IR were at historical lows, borrowing was easy.
- moral hazard at play
- at the same time, mortgages no longer just loans, they were sliced up, combined and packaged into securities that banks traded, acquired and sold to investors
- package might contain mortgages given to both types of borrowers
- banks acquired these on the argument that even if one was risky, other had value
- this was false, no one knew what these mortgage related assets were worth, defaults, asset value fall to 0, banks collapse.
Do you agree with the 700$ billion bank bailout
No, as although with a large enough financial institution collapsing, can have enormous ripple effects and bring down the rest of the economy, but it must also be noted that banks take advantage of this moral hazard, understanding they are insulated from risk is what caused the crash in the first place.
You’re a smart guy/girl with a lot of options, and right now the economy is not doing well and lots of banks have failed. Why are you still interested in banking when you could do anything else?
- long term view
- a downturn could be an even better time to enter the industry, as you’ll know how to work when times are both good and bad
- also been interested in finance for a long time, not going to let ST difficulties deter me from the field, have explored other options and concluded that this is the best one for you.
Where did your interest in finance begin?
Uncle, worked as an investment banker, would always tell me stories growing up, i was weirdly hooked to the dynamism the industry brings as well as even as a kid, understanding the wide range, tangible effects of financial transactions I could be involved in.
