Embracing the Power of Case Studies

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Warren Buffett in his 1996 letter to his shareholders said:

“To invest successfully, you need not understand beta, efficient markets, modern portfolio theory… You may, in fact, be better off knowing nothing of these…In our view, though, investment students need only two well-taught courses – How to Value a Business, and How to Think About Market Prices.”

I don’t know whether it is an urban legend but he supposedly mentioned that he would do one case study after another when asked about the “How to value a business” course.

The case study method of learning is the hallmark of the Harvard Business School. The idea is that by using real-life situations, you can gain insights that may be difficult to teach via lectures.

If you are a newbie, there are tons of case studies readily available online. Read them so that you can accelerate your learning curve.

If you want to know more about how to benefit from investment case studies go to” Can we learn anything from investment case studies?”
How to learn investing from case studies?

If you are learning value investing, you need to develop 2 key skills – how to analyze companies and how to value them.

According to Warren Buffett, the way to learn how to value a business is to do one case study after another.

There are two ways for you to learn from the case study:
  • Passively by merely looking at how I have analyzed and valued the company.  You can use this as a template for your own analysis and valuation
  • Actively by trying to analyze and value the company yourself before reading the case study. Then compare your analysis and valuation with mine.

It should be remembered that to develop the necessary investment skills you need both knowledge and practice.  Case studies provide one way to see what you have learned being applied in a real-world setting.

The alternative to case studies is a simulation or paper transactions. But these are stories for another post.

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