Here is a small collection of words of wisdom from the legendary investor Warren Buffett.
Enjoy!
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The course of the stock market will largely determine... when we'll be right, but the accuracy of our analysis will determine whether we'll be right. In other words, we.... concentrate on what should happen, not when it should happen... If we start deciding, based on our guesses or emotions, whether we will... participate in a business where we.... have some long-run edge, we're in trouble. We will not sell our interests in businesses when they are attractively priced just because some astrologer thinks the quotations may go lower even though forecasts... will be right some of the time... The availabilty of a quotation for your business interests should always be an asset to be utilized if desired. If it gets silly enough in either direction, you take advantage of it. Its availability should never be turned into a liability whereby its periodic aberrations in turn form your judgements.
(Buffett Partnership letter, July 1966)
All of our investments usually appear undervalued to me - otherwise we wouldn't own them.
(Buffett Partnership letter, July 1966)
I am not in the business of predicting general stock market or business fluctuations. If you think I can do this, or think it is essential to an investment program, you should not be in the partnership.
(Buffett Partnership letter, July 1966)
As Ben Graham said: "In the long run, the market is a weighing machine - in the short run, a voting machine." I have always found it easier to evaluate the weights dictated by fundamentals then votes dictated by pyschology.
(Buffett Partnership letter in 1969)
We ordinarily make no attempt to buy equities favourable short-term price behavior. In fact, if the business experience continues to satisfy us, we welcome lower prices as an opportunity to acquire even more of a good thing.
(1977 Annual Report)
(The) argument is made that there are just too many (investment) question marks about the be near-term future; wouldn't it be better to wait until things clear up a bit? You know the prose: "Maintain buying reserves until current uncertainties are resolved," etc. Before reaching for that clutch, face up to two unpleasant facts: the future is never clear; you pay a very high price in the stock market for a cheery consensus. Uncertainty actually is the friend of the buyer of long term values.
(Forbes, August 6, 1979)
The market, like the Lord, helps those who help themselves. But unlike the Lord, the market does not forgive those who know not what they do.
(1982 Annual report)
I have seen no trend toward value investing in the 35 years I've practised it. There seems to be some perverse human characteristic that likes to make easy things difficult.
(Talk to ColumbIa Business School in 1985)
The fact that people will be full of greed, fear or folly is predictable. The sequence is not predictable.
(Channels magazine, talk to Patricia Bauer, 1986)
Money, to some extent, sometimes lets you to be in more interesting environments. But it can't change how many people love you or how healthy you are.
(Channels magazine, talk to Patricia Bauer, 1986)
Business schools "reward complex behavior more than simple behavior, but simple behavior is more effective."
(Channels magazine, talk to Patricia Bauer, 1986)
I like the fact it's a big transaction. I can't be involved in 50 or 75 things. That's a Noah's Ark way of investing - you end up with a zoo that way. I like to put meaningful amounts of money in a few things.
(Wall Street Journal, Sept 30, 1987, shortly after Berkshire's $700 million investment in Solomon)
It looks... impressive if it comes out of a computer. But it's frequently nonsense. The person who's making the decision is far more important.
(Outstanding Investor Digest, Oct 7, 1987)
I'm an analyst basically. I try to figure out what businesses are worth, then divide bu the number of shares outstanding.
(Omaha World-Herald, October 18, 1987, quoting Money magazine)
The market is there only as a reference point to see if anybody is offering to do anything foolish. When we invest in stocks, we invest in businesses. You simply have to behave according to what is rational rather than according to what is fashionable.
(Fortune, Jan 4, 1988)
It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
(Widely quoted)
On turnarounds:
The projections will be dazzling -- the advocates will be sincere -- but in the end, major additional investment in a terrible industry usually is about as rewarding as struggling in quicksand.
(Widely quoted)
I don't know what it'll (the stock market) do tomorrow or next week or next year. But I do know that over a period of 10 to 20 years you'll have some very enthusiastic markets and some very depressed markets. The trick is to take advantage of the markets rather than letting them panic you into the wrong action.
(Widely quoted)
It's just not neccessary to do extraodinary things to produce extraodinary results.
(Widely quoted)
On properly valuing a business:
To properly value a business, you should ideally take all the flows of money that will be distributed between now and judgement day and discount them at an appropriate discount rate. That's what valuing a businesses is all about. Part of the equation is how confident you can be about those cash flow occurring. Some businesses are easier to predict than others. For example, water companies are generally easier to predict than building contractors. We try to look at businesses that are predictable.
(Annual meeting in 1988)
Anything can happen in stock markets and you ought to conduct your affairs so that if the most extraodinary events happen, that you're still around to play the next day.
(Buffett on Adam Smith's Money World show, June 20, 1988)
Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be misappraised.
(Fortune, December 19, 1988)
Time is the friend of the wonderful business, the enemy of the mediocre.
(1989 Annual Report)
It's no sin to miss a great opportunity outside one's area of competence.
(1989 Annual Report)
I've often felt there might be more to be gained by studying business failures than business successes. It's customary in business schools to study business successes. But my partner, Charlie Munger, says all he wants is to know where he is going to die -- so he won't ever go there.
(Talks to Emory Business College, November, 1989)
Stocks are simple. All you do is buy shares in a great business for less than the business is intrinsically worth, with management of the highest integrity and ability. Then you own these shares forever.
(Forbes, Aug 6, 1990)
You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy woth a 130 IQ. Rationality is essential.
(Widely quoted)
The most common cause of low price is pessimism -- sometimes pervasive, somtimes specific to a company or an industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It's optimism that is the enemy of the rational buyer. None of this means, however, that a business or a stock is an intelligent purchase because it is unpopular; a contrarian approach is just as foolish as follow the crowd strategy. What's required is thinking rather than polling.
(1990 Annual report)
The most important thing to do when you find yourself in a hole is to stop digging.
(1990 Annual Report)
Someone's sitting in the shade today because someone planted a tree a long time ago.
(NewsInc, January, 1991)
To swim a fast 100 meters, it's better to swim with the tide than to work on your stroke.
(Annual meeting in 1991)
There are a lot of profitable things you can do but you have to stick to what you can do. We can't find a way to knock out Mike Tyson.
(Annual meeting in 1991)
On learning from mistakes:
I guess I had too much inclination originally to buy mediocre, or worse than mediocre, businesses at a very cheap price. That works OK, in the sense that you never lose money; but you never end up with a great business that way either. Sp that emphasis has shifted over the years. We don't want to buy the worst furniture store in town at the cheapest price; we want to buy the best one at a fair prcie.
(Widely quoted)
His biggest strength:
I'm rational. Plenty of people have higher IQs, and plenty of people work more hours, but I am rational about things. But you have to control yourself; you can't let your emotions get in the way of your mind.
In 1986, my biggest accomplishment was not doing anything stupid. There is not much to do; there is not much available right now. The trick is, when there is nothing to do, do nothing.
I love what I do. All I want to do is do what I'm doing as long as I can. Every day I feel like tap dancing through the day. I really do.
(Widely quoted)
Investment must be rational; if you don't understand it, don't do it.
(Forbers, Oct 19, 1992)
On Growth:
Growth is always a component in the calculation of value, constituting a variable whose importance can range from negligible to enormous and whose impact can be negative as well as positive.
(1992 Annual Report)
What counts for most people in investing is not how much they know, but rather how realistically they define what they don't know. An investor needs to do very few things right as long as he or she avoids big mistake.
(1992 Annual Report)
Two kind of information:
Those things you can know and those important things to know. Those things you can know that are important constitute an extremely small percentage of the total known.
(Widely quoted)
On investing:
Investing is not that complicated. You need to know accounting, the language of business. You should read The Intelligent Investor. You need the right mindset, the right temperament. You should be interested in the process and be in your right circle of competence... Avoid overstimulation. Read Ben Graham and Phil Fisher, read annual reports and trade reports, but don't do equations with Greek letters in them.
(Annual meeting in 1993)
Restructurings -- That's a word for mistakes.
(Annual meeting in 1993)
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To be continued....
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