I’m listening to Warren Buffett and buying cheap UK shares

Legendary investor Warren Buffett has been very successful. He has patiently refined his approach to selecting, buying, holding, and selling shares. I think I can also profit following Buffett’s principles, by buying cheap UK shares. Here is how. Different investors use a variety of approaches to value a company’s shares. Many will look at its price-to-earnings multiple, for example. Buffett’s approach starts with considering how much profit a company might make in future. Clearly that can be difficult, as many variables could affect the outcome. So Buffett considers what factors may help a company sustain profits. For example, if it has a unique solution to a customer problem in the form of a patented technology or local monopoly, that could help. As those potential earnings are in the future, they have less value than the same money in hand today. Buffett discounts such future cash flows accordingly. If a company’s current value is markedly below likely discounted future profits, it may be an attractive investment for him. The future profits are a projection. All sorts of problems might arise in the meantime to drag them down. That is why Buffett – and many other investors – look for a “margin...

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