What Young Warren Buffett Can Teach You About Investing...READ MORE
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 | | Revealed: How Investors Can Improve their Returns Like Warren Buffett | | Regarded as a value investor in the stock market, today Warren Buffett needs to buy entire companies to move the bottom line. After all, Berkshire Hathaway, his holding company, is valued at hundreds of billions of dollars.
That's not something that investors starting out can replicate. However, they can apply the same principles that Buffett uses when buying shares of a company to get similar—if not better—returns.
At its core, what investors need to focus on is cash flow. A good company may need some cash that it generates to continue operations. However, if it can throw off more cash than it needs, that money can be reinvested. While Buffett uses insurance companies and their "float" of excess cash, most other profitable businesses throw off cash. This cash flow is more important than earnings, the most-talked about metric in finance.
For smaller investors, this cash may come to them as a dividend, a literal delivery of cash. Or it may be reinvested in the company to keep it growing. What matters for smaller investors is that the cash is there, it's generated, and it's being put to productive use. Because Buffett can invest at market-beating returns, for instance, he doesn't pay a dividend, opting to hoard that cash until buying opportunities arise.
The other secret to this cash flow is consistency. Cash flow can vary for growth or cyclical companies.
Finding companies with consistently growing cash flows represent one of the best ways to invest over the long haul.
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