Billionaire investor Warren Buffett once described the investing style he and his business associate Charlie Munger practised-
"Benign neglect, bordering on sloth, remains the hallmark of our investment process."
How can you get rich by being lazy? Simple.
You select only those companies that have maintained high margins and returns on equity and capital, as well as have grown earnings per share steadily over the past 5 – 10 years.
For Buffett, that kind of quality company can keep on growing in a more or less predictable way. You actually want to do as little as possible after buying the stock because it is the steady compounding of earnings growth over time that generates the big gains and fat dividend income.
In short, be active in your searches but lazy in your ownership of quality companies.
For example, FlexiGroup Limited (ASX: FXL), the financial services company which offers leasing, vendor financing and other payment solutions, has maintained an upward earnings trend, as well as net profit margins over 15% since 2006. The company's Flexirent and Certegy brands are well-known by customers buying household goods on credit or making payments to a variety of merchants and businesses. FlexiGroup gets a piece of all the transactions that go through it, like a credit card company. That keeps earnings growing.
Slater & Gordon Limited (ASX: SGH) is another company that supplies services high in demand. The company has a network of law practices which specialise in personal injury law. Slater & Gordon attracts a premium for its services that translates into healthy margins. In addition, the company is an expansion phase all across Australia and in the UK, buying out smaller competitors along the way. Income growth through acquisitions can build up over the years, so you should have the stock as a long-term buy and hold. As long as the stock story is improving, you can be as slothful as you wish.
