Warren Buffett’s Tried And Tested Due Diligence Methods When Investing
As financial service professionals, we want to uncover the best practice and methods when investing and help educate others on how to perform the correct level of due diligence for an opportunity. By incorporating tactics and insights from Warren Buffett’s investment strategy.
Make Your Money Work Harder For You
Investing has its clear potential but of course, it comes with a risk, and typically with higher risk means higher returns. Although the medicinal cannabis industry is labelled high risk, based on reports from Sativa Investments on the NEX [1], we have discovered some investors receive ROIs of 100% or more over 6-18months, as the shares traded at prices that were multiples of the initial pre-IPO. Now, this may not be true of all opportunities: usually, when an investment is made, it is wise to expect a return or dividends within 3-5 years.
What’s The Standard Procedure?
Due diligence (D.D), do your homework! It is an integral part of making any form of investment decision. For those of you not as familiar with the term, technically it is the investigation or exercise of care that a reasonable business or person is expected to take before entering into an agreement or contract. [2]
If you’re looking in the cannabis sector; we have expert advice from cannabis lawyer Robert Jappie who says it’s crucial to learn how long the companies cannabis cultivation license are held for (3 years + is a good sign). It’s also important to ensure the management team behind the project are capable of achieving what they promise; whilst displaying a robust business plan and model.
Successful Investor: Warren Buffett’s Strategy
You may have heard of the most successful investor in the world, Warren Buffett – with a modest net-worth of $72b USD and major shareholder in the likes of Coca-Cola, Wells Fargo and American Express [3], in which he has held shares for over 20 years.
Warren Buffett’s investment strategy is to recognise the companies potential and assess whether it can make money as a business. He isn’t concerned with how the market will eventually see its value. Buffett intends to hold stocks and shares for the long term and isn’t focused on making a quick buck, making his first million at 30 he then reached the $1b mark at the humble age of 56.
After all, good things come to those who wait.
Did you know the most successful investor in the world has invested interest in the cannabis industry? Through his large shares in Kraft Heinz. Evolv Ventures, a venture fund backed by Kraft Heinz, he has invested $23 million in cannabis start-up Flowhub.
This is a clear example of the true beauty of diversification, by not focusing on one genre in your portfolio you’re naturally spreading the risk. It essentially keeps your portfolio assets spread and ranging across high growth but diverse sectors. A core element of Warren Buffett’s investment strategy.
Which is why it may be time to expand yours and branch into one of the hottest markets seasoned investors have ever seen. At JPD Capital, we are the investment vehicle that is focusing on medicinal cannabis-based projects, exercising huge growth in the sector. Are you a high net worth individual or sophisticated investor looking for the perfect opportunity?