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.

Warren Buffett is one of the world’s richest people, worth over $100bn today. He’s also been investing for over 80 years, ever since he turned 11 years old. What the ‘Oracle of Omaha’ doesn’t know about investing isn’t worth me knowing. Here are 10 investing tricks I learnt from Warren Buffett’s wise words that have made me a far better investor today.

1. “Do not save what is left after spending, but spend what is left after saving”.

This Warren Buffett quote helped me invest directly from my monthly pay, preventing me from splurging my money and always ending up broke. After all, if I can’t save, then I can’t invest, right?

2. “The worst investment you can have is cash. Cash is going to become worth less over time”.

Here, I learnt from Warren Buffett that I would never get rich by squirrelling every bit of cash away in deposit accounts. I have to risk some of my money in order to earn higher returns. And that means investing in assets such as shares, bonds, and property.

3. “Just buy something for less than it’s worth”.

This Buffett saying helped mould me as a value investor. These wise words taught me it’s okay to pay premium prices to invest in excellent companies. After all, quality costs more, right? Hence, after 35 years, I’m still searching out lowly rated stocks with high earnings/dividend yields.

4. “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes”.

Here, I learnt from Buffett that investing is about buying shares for the long term, not gambling or trading on short-term price movements.

5. “It’s far better to buy a wonderful company at a fair price, than a fair company at a wonderful price”.

This is one of the most important things that I learnt from Warren Buffett. These days, I aim to buy into world-leading businesses with great growth prospects. Gone are the days when I would buy beaten-down stocks, only to watch them take more beatings!

6. “Never invest in a business you cannot understand”.

In my early years as an investor, I used to buy stakes in all kind of weird and wonderful businesses. Most of these ‘scattergun’ investments lost money one way or another. Today, I would far rather invest in established companies selling great products/services and led by good managers.

7. “Never bet against America”.

As a proud American, Warren Buffett has witnessed nine decades of US global dominance. Today, the US is still the world’s largest economy, with the richest population and the biggest stock markets. That’s why, like Buffett himself, my family’s wealth is largely invested in US stocks.

8. “The best chance to deploy capital is when things are going down”.

This Buffett maxim helped me deal with my fear of stock market crashes. In the depths of the 2007-09 stock market meltdown, Buffett invested 100% of his personal wealth into US equities. Since March 2009’s low, the S&P 500 index has gone from 666 to 4,650 today. That’s almost exactly a seven-fold return.

As the master also said, “Be fearful when others are greedy, and be greedy when others are fearful”. Nowadays, I happily take profits by selling when stock prices have soared. Likewise, I always keep a chunk of cash in reserve, ready to deploy when the next stock market crash arrives!

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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Last week, Joe Biden announced that he would nominate current US Federal Reserve (Fed) Chair Jay Powell for a second term. His most pressing concern will be to stop the onset of hyperinflation. Inflation, which is the general rise in price levels due to the increase of monetary supply, has taken off in recent months. This can be bad news for us stock investors. Warren Buffett has said there is no greater destroyer of wealth than inflation. Right now the Fed is indicating that in order to curb inflation, which is running in excess of 6%, it will taper its purchases of US treasury securities. This and the increase of interest rates in 2022 are the options available to Powell and his team at the Fed. It remains to be seen how soon and how effective these interventions will be in preventing all-out carnage on investor returns.

There are, however, certain types of businesses that can survive and even do well in this environment. I recently wrote an about a UK stock that I think will do well in this inflationary environment. I believe the following two banking stocks are in that same mould. Why banks? Well, they benefit from higher interest rates because it affords them higher yields on the cash they hold on behalf of customers.

A Buffett-backed banking stock

First up is Bank of America (NYSE: BAC). When Buffett sunk $5bn into this banking stock in 2011, it was a vote of confidence in the leadership of CEO Brian Moynihan and that bet has not let Buffett down. Bank of America has arguably the best consumer banking brand in the US. Its industry-leading wealth management platforms function well with Merrill Lynch and it has made the necessary technology investments to be award-winning in that space. It is one of the ‘Big Three’ US banks, which attract 50% of all new checking accounts. With a current price-to-earnings ratio of 13.86 and a price-to-book ratio of 1.52, I think this banking stock is trading at a discount.

A bank for the ages 

Fun fact: US Bancorp (NYSE: USB) operates under the second-longest continuous banking charter in US history and is currently the fifth-largest banking institution in the US. Fun aside, this stock is also a staple in the value matrix of many hedge funds. Its 3.12% dividend yield is attractive to me. With $568bn in assets, this bank is not only large but very efficient. It has trended upward with an average increase of 9% over the past 10 years. As a banking stock, it excels not only due to its size and efficiency but is expanding rapidly. It recently acquired MUFG Union Bank for $8bn and just announced plans to acquire fintech firm Travel Bank.

Banks are of course subject to various systemic risks – the 2008 crisis proved this. And all banks are dependent in part on central banks for their cues. Right now the main threat is that the Fed fails to control inflation. Inflation allows borrowers to pay back lenders with money that is worth less than what they originally borrowed. Inflation in excess of 6%, combined with the Biden administration’s plan to increase the corporate tax rate by at least 5%, could mean a pretty steep hurdle rate for banking investors to make good returns in the future.

Stephen Bhasera has no position in any of the shares mentioned. Bank of America is an advertising partner of The Ascent, a Motley Fool company. 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.

FTSE 250 incumbent Future (LSE:FUTR) has seen its share price rally recently. Yesterday it increased handsomely based on excellent full-year results. Should I add shares to my portfolio at current levels? Let’s take a look.

Media giant

Future is an international media and digital publishing firm. It produces and maintains technology and works with leading brands throughout the world to enhance their presence and reach out to their customer bases. Some of its proprietary technology includes website platforms, email delivery systems, and lead generation tools.

As I write, shares in Future are trading for 3,644p. A year ago they were trading for 1,792p, which is a 103% return! The FTSE 250 index in the same time period has only increased close to 13%. Future shares yesterday jumped 15% due to positive results.

Fantastic results continue

Future’s full-year results announced yesterday were extremely impressive. I am not surprised the share price jumped as a result. Future reported revenue had increased by 79% to £606.8m compared to last year. Operating profit increased 127% to £115.3m too. Cash generated grew by a mammoth 115%. From an operational perspective, organic growth was reported in all key territories, which is a good sign.

The good results prompted Future to declare a dividend of 2.8p per share. This is up from 1.6p last year. Shares that pay a dividend and could make me a passive income are usually an attractive prospect. Especially when they seem to be performing well and growing organically, which Future is if these results are anything to go by.

Future also has an excellent track record of performance and growth. I understand past performance is not a guarantee of the future. I tend to review this as a gauge. Revenue and operating profit have both increased year on year for the past four years.

FTSE 250 stocks have risks

I have two concerns with Future. Firstly, in its full-year results, it was confirmed that Covid-19 boosted the business in terms of growth and performance. Could this mean if the pandemic settles down we may not see such levels of growth once more? In addition to this, I have an issue with the current valuation of Future shares. At current levels it sports a price-to-earnings ratio of 56, which is a bit high for my liking. I could add shares at this level but if any negative news knocked the price down, I could lose out.

Overall I like Future as a company and its growth and results are there for all to see. I would consider buying shares for my portfolio but I think I will wait for them to fall a bit. Performance and growth will continue in my opinion but I want to buy shares a bit cheaper than current levels. There are other FTSE 250 stocks that are performing well that are better priced for my portfolio currently.

Jabran Khan 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.

According to the Office for National Statistics the UK inflation rate rose to 4.2% in October. Demand for oil and gas is pushing up energy bills across the world. Shortages of many goods, because of factory shutdowns due to covid restrictions, are pushing up prices. If this trend continues then we could easily see double-digit inflation next year.

My plan for protecting myself

I believe that high dividend paying shares can be a hedge against inflation. My thinking is simple. These high dividend paying companies tend to be established firms in stable sectors. In times of rising prices, they should be able to increase the prices of their goods or services and maintain or increase their dividends more than the rate of inflation.

For my own portfolio, I’ve always liked ETFs (exchange-traded funds). These are funds that track an index or sector and can be bought and sold like a share through most online brokers. They allow me to invest in multiple companies in a single fund and are usually low cost.

The ETF I’ve been looking recently at is SPDR S&P UK Dividend Aristocrats ETF (LSE:UKDV). This fund tracks the S&P UK High Yield Dividend Aristocrats Index.

This index follows the 40 highest dividend yielding UK firms that have either increased or maintained their dividends for at least seven consecutive years. It also focuses on large businesses since new entrants to the index have to have a market cap of at least $1bn. The companies also have to meet the index’s liquidity requirements.

Companies in this ETF are mostly large blue-chip companies across a variety of sectors such as insurance, mining, and pharmaceuticals. Household names include the likes of Legal & General, Rio Tinto, and GlaxoSmithKline.

The ongoing charge is a very reasonable 0.30%. The current dividend yield is 3.77%

Am I going to invest?

Though it might not appeal to all investors, I like this ETF. It has a high eligibility criterion and is well diversified across sectors.

Although, it’s worth me remembering there are risks. Some of these high dividend paying companies will be established, successful firms that are great at generating free cash flows. However, some will feel they have to maintain high dividends to keep their investors happy when the business is not growing. In the long run, companies like these are unlikely to prosper.

Looking at the performance, the one-year return excluding dividends is about 9% and over five years the fund is down about 9%. However, taking the dividends into account, the fund would have provided me with a decent total return over both time frames.

On balance, given that the UK inflation rate could reach double digits next year, I’m seriously contemplating adding this high dividend paying ETF to my portfolio.

Niki Jerath has no position in any of the shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline. 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.