I was lucky enough to have a number of positive influences before I started investing. One of the first was discovering Lord Lee’s story of becoming an ISA millionaire. It inspired me to set this as my own investing goal. But it wasn’t the only influence I had, because I also discovered Warren Buffett early on in my journey too.

So now, I aim to become an ISA millionaire by using Warren Buffett’s investing philosophy. Here’s what I’m doing.

Warren Buffett’s baseball analogy

The first Warren Buffett idea I use is from baseball. I don’t watch the sport myself, but all I need to know is ‘three strikes and you’re out’. When a batsman misses three pitches, they’re out. But it doesn’t quite work like this when investing. Warren Buffett explains it best: “The trick in investing is just to sit there and watch pitch after pitch go by and wait for the one right in your sweet spot.”

What he means by this is that an investor doesn’t have to be an expert on every company or sector. I don’t only get three pitches (or companies) to choose from, but every publicly listed company.

Warren Buffett also described this as investing in your circle of competence in Berkshire Hathaway’s annual shareholder letter in 1996. It doesn’t matter how big the circle is – or area of expertise – but knowing my boundaries is key.

Today, I buy companies that I understand. I also don’t stress when other investments are performing well, particularly if they aren’t in my circle of competence. I have many options to choose from, and can wait for the right pitch.

Buying quality companies

The next strategy I use is again best described in the words of Warren Buffett himself: “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

There are many ways to define a wonderful company. Usually though, it depends on the returns the business can generate on the capital it uses. One way to calculate this is return on capital. This is the profit a business makes divided by the debt and equity capital it used to generate the profit.

If a business achieves a 20% return on capital, and is able to reinvest its profits at that same return, then over time, the company will generate wonderful returns for investors. Warren Buffett means it’s far better to pay a fair price for a business like this, rather than pay a wonderful price for a business that generates far lower returns on its capital.

So now, I bias my own portfolio towards companies with high returns on capital, but I make sure I pay a fair price.

Patience is key

There’s no quick route to becoming an ISA millionaire, so patience is key. This is what Buffett said about the companies he buys: “Our favourite holding period is forever.” I think this is the most important piece of advice I’ve taken from him.

I look to buy wonderful companies, and let them compound over long periods. Sometimes share prices are volatile, but if I understand the business and nothing has changed, I can carry on holding the shares.

Dan Appleby has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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The problem of soaring inflation looks set to reign well into 2022. In recent hours. Jerome Powell, head of The Federal Reserve, said the bank intends to stop using the term “transitory” when referring to the trend of rampant price rises. It suggests that Powell now expects extreme inflationary pressures to last longer than previously thought.

This perhaps isn’t much of a surprise. Inflation readings in major economies across North America, Asia and Europe are now sitting at multi-year highs. Some of the supply chain issues that have caused prices to rocket appear no closer to being resolved either.

It’s no wonder that gold prices are steadily strengthening following extreme weakness earlier in 2021 — surging inflation boosts demand for non-paper currencies such as precious metals. Yellow metal prices are building a base around $1,800 per ounce and could be poised to strike higher. In a recent interview with Arabian News, Barclays‘ chief market strategist Gerald Moser suggested gold values might rise as much as 20% over the next year.

Buying the gold producers

The prospect of strong and sustained price increases isn’t the only reason I’d seek to get exposure to gold today. The enduring Covid-19 emergency, swift economic cooling in China, and the prospect of fresh trade wars between major nations could also spook investors into buying safe-haven precious metals.

I wouldn’t load up on gold coins or bars however. Nor would I invest in something like the Goldman Sachs Physical Gold ETF. Owning physical gold, or a financial instrument like an exchange traded fund (ETF) that’s backed by the metal, is a good way to make money when the commodity price goes up. But it doesn’t let investors generate income from the assets they hold.

This is why I’d rather have exposure to the companies that pull the yellow metal itself out of the ground. One way I can do this is by investing in an ETF which holds shares in gold companies, like Sprott Junior Gold Miners ETF. Another way is to go shopping on the London Stock Exchange for specific shares to buy.

A top penny stock on my watchlist

This is the route I’m looking to pursue. It would allow me to receive dividends in addition to riding any gold price gains. Buying individual mining stocks or ETFs which own gold companies expose investors to the business of digging for the metals themselves. This can prove problematic for profits as production issues that hit revenues and drive up costs can be commonplace.

Still, I think the possibility of receiving juicy dividends makes up for this extra risk. And some UK gold-producing shares offer some jaw-dropping yields right now. Centamin is a mining company I’m considering buying for this very reason. Its yields for 2021 and 2022 sit at a gigantic 7.2% and 5.3% respectively.

I like this particular penny stock too because of work it’s undertaking to turbocharge production levels and bring down costs. Centamin is looking to produce up to 500,000 ounces of gold a year by the middle of the decade. I think the business could prove a lucrative UK share to buy in the near term and beyond.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

It’s been a rough couple of days for Salesforce (NYSE: CRM) stock. As I write, the share price is down almost 10% since the market closed on Monday. But it’s also been a busy time for the company. It released its third-quarter earnings on Tuesday, and also announced a new co-CEO.

Let’s take a look to see if the recent share price weakness has presented me with a buying opportunity.

Salesforce’s results

It’s best to start with the third-quarter results. Adjusted earnings per share came in at $1.27, which was an impressive feat against consensus estimates of $0.92. Revenue for the quarter came in at $6.86bn, which is an increase of 27% over the same period one year ago. This was about in line with analysts’ expectations for revenue.

Salesforce also raised its revenue guidance for its full fiscal year 2022, which is now for growth to be around 24%. It then reiterated revenue guidance of 20% for 2023.

These figures are good, in my view. The growth rate was strong, and the company upgraded its outlook for the coming year. So it’s not exactly straightforward as to why the stock has fallen.

However, US market valuations are currently rather high based on historical standards. Companies have to show exceptional growth to warrant these high valuations. If they don’t, and even worse, they miss analysts’ expectations, then share prices can fall significantly.

Looking at Salesforce’s valuation in particular, the stock does look pricey. On a price-to-earnings (P/E) basis, the shares are valued on a multiple of 65. After the company reiterated its revenue growth for 2023 at 20%, this translates into an earnings growth forecast of 11%. I’d want earnings to be growing more than this to warrant such a high P/E ratio.

A new co-CEO

The earnings release wasn’t the only news out of Salesforce this week. That’s because the company promoted Bret Taylor into a co-CEO role, to work alongside current CEO Marc Benioff. He was previously CTO at Facebook (now Meta), and at Salesforce he’s been COO since 2019.

The firm has grown substantially through acquisitions in recent years. The company acquired Tableau in 2019, which was followed by purchasing Slack in 2020. The appointment of Taylor as co-CEO seems prudent given how the business has evolved into a much bigger company of late.

I don’t attribute the recent Salesforce stock price weakness to the appointment of Taylor though. He’s highly experienced in the technology sector, and was promoted from within so will know the company very well. Taylor was also appointed the independent chair of the board of Twitter this week, so he will no doubt be busy in his new roles.

So is the stock a buy?

I view Salesforce as a quality business. It’s highly cash generative, and the forecast for operating margin this year is a high 18.6%. There’s integration risk to think about though, given how acquisitive the company has been. There are no guarantees that these businesses will be successful within Salesforce.

But it’s mainly the valuation that holds me back from buying the stock today. I’m keeping it on my watchlist to buy on any further weakness in the share price.

Dan Appleby owns shares of Meta. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Twitter. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Shares in cinema operator Cineworld Group (LSE: CINE) fell by 20% in November, even as moviegoers flocked to see the latest James Bond film. With more potential blockbusters scheduled for release later this year, I reckon Cineworld could be on track to deliver a strong recovery over the coming months.

In this article I want to explain what I think happened in November — and whether I’d buy Cineworld stock for my portfolio.

007 boosts revenue

Us Brits love a good Bond film. Cineworld’s UK revenue in October was 27% above 2019 levels, as moviegoers rushed to see Daniel Craig’s final outing as 007.

The group’s cinemas in the US and elsewhere also delivered an improved performance. Cineworld’s total revenue in October reached 90% of 2019 levels. As a result, the business generated positive cash flow in October, for the first time since before the pandemic.

Takings were boosted by punters tucking into high margin treats, such as soft drinks and popcorn. We don’t know if visitor numbers have matched 2019 levels — Cineworld didn’t release this information. Even so, I reckon October’s result is a big milestone on the road to recovery.

Watch out for the evil villain

Blockbuster movies like No Time to Die are the heroes in this story, driving movie fans back to the cinema. But I reckon there’s a villain in the piece, too — debt.

Cineworld’s net debt was a massive $8.4bn at the end of June. Even if we exclude lease liabilities on the group’s cinemas, net debt was still $4.8bn. That’s equivalent to 3.6 times 2022 forecast EBITDA, or underlying cash profits.

This level of leverage is well above my preferred limit of 2-2.5 times EBITDA. I think there’s still a risk that Cineworld will struggle to repay this debt without some kind of restructuring. This could include raising new cash from shareholders.

Even if Cineworld manages to dodge this bullet, there’s another potential baddie lurking in the shadows. Canadian cinema chain Cineplex is currently seeking $1.1bn in damages from Cineworld for cancelling an acquisition deal agreed just before the pandemic.

I have no idea who will win this legal battle. But I think that uncertainty around the group’s debt levels and legal problems are two of the main reasons why the shares fell in November.

Cineworld shares: would I buy?

I don’t want to be too downbeat here. Cineworld is the world’s second-largest cinema business. It has good economies of scale and a strong portfolio of sites in the UK and US. I think the company is a good operator, too. CEO Mookie Greidinger is a sector specialist who is known to be fanatical about the cinema experience.

Broker forecasts suggest Cineworld revenues will rise to 90% of 2019 levels next year, allowing the group to start repaying some of its debt. Earnings are expected to return to 2019 levels in 2023. If this happens, then the I think the shares could be cheap at current levels.

However, 2023 is still a long way away. In the current environment, I’m not comfortable investing in a consumer business with such high levels of debt. For me, the risks are too high.

I may return to the cinema, but I won’t be buying Cineworld shares for the foreseeable future.

Roland Head has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.