Warren Buffett
"Price is what you pay. Value is what you get."
"Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily-understandable business whose earnings are virtually certain to be materially higher five, ten and twenty years from now. Over time, you will find only a few companies that meet these standards - so when you see one that qualifies, you should buy a meaningful amount of stock. You must also resist the temptation to stray from your guidelines: If you aren't willing to own a stock for ten years, don't even think about owning it for ten minutes. Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also will the portfolio's market value." -1996 Shareholders Letter
“In our view, investment students need only two well-taught courses – How to
Value a Business, and How to Think About Market Prices." -1996 Annual Report
"This is not like Olympic diving where if you can do a very difficult dive, the payoff is greater - if you do it well - than if you do some very simple dive. You're paid just as well for the most simple dive as long as you execute it right. So there's no reason to try three and a half somersault dives when you get paid just as well for just diving off the side of the pool and going in clean." -1998 Annual Meeting
"I would rather be certain of a good result than hopeful of a great one." -1996 Shareholders Letter
"The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage. The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors." - Fortune magazine, "Mr. Buffett On The Stock Market".
"We purchased National Indemnity in 1967, See’s in 1972, Buffalo News in 1977, Nebraska Furniture Mart in 1983, and Scott Fetzer in 1986 because those are the years they became available and because we thought the prices they carried were acceptable. In each case, we pondered what the business was likely to do, not what the Dow, the Fed, or the economy might do. If we see this approach as making sense in the purchase of businesses in their entirety, why should we change tack when we are purchasing small pieces of wonderful businesses in the stock market?" -1994 Shareholder Letter
"In fact, the true investor welcomes volatility. Ben Graham explained why in Chapter 8 of The Intelligent Investor. There he introduced "Mr. Market," an obliging fellow who shows up every day to either buy from you or sell to you, whichever you wish. The
more manic-depressive this chap is, the greater the opportunities available to the investor. That's true because a wildly fluctuating market means that irrationally low prices will periodically be attached to solid businesses. It is impossible to see how the availability of such prices can be thought of as increasing the hazards for an investor who is totally free to either ignore the market or exploit its folly." -1993 Shareholders Letter
"The fact that people will be full of greed, fear or folly is predictable. The sequence is not predicatable."
"Our goal is to find an outstanding business at a sensible price, not a mediocre business at a bargain price. "
"The key to successful investing was the purchase of shares in good businesses when market prices were at a large discount from underlying business values."
"Success in investing doesn't correlate with I.Q. once you're above the level of 25. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing."
"You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential."
"There seems to be some perverse human characteristic that likes to make easy things difficult."
"If you're an investor, you're looking on what the asset is going to do, if you're a speculator, you're commonly focusing on what the price of the object is going to do, and that's not our game." -1997 Annual Meeting
"We continually search for large businesses with understandable, enduring and mouth-watering economics that are run by able and shareholder-oriented managements. This focus doesn’t guarantee results: We both have to buy at a sensible price and get business performance from our companies that validates our assessment. But this investment approach -- searching for the superstars -- offers us our only chance for real success. Charlie and I are simply not smart enough to get great results by adroitly buying and selling portions of far-from-great businesses." -1991 Shareholder Letter
"We don't get paid for activity, just for being right. As to how long we'll wait, we'll wait indefinitely." -1998 Annual Meeting
"You also have to have the knowledge to enable you to make a very general estimate about the value of the underlying business. But you do not cut it close. That is what Ben Graham meant by having a margin of safety. You don’t try to buy businesses worth $83 million for $80 million. You leave yourself an enormous margin. When you build a bridge, you insist it can carry 30,000 pounds, but you only drive 10,000 pound trucks across it. And that same principle works in investing." -The Superinvestors of Graham-and-Doddsville, by Warren Buffett.
“Someone's sitting in the shade today because someone planted a tree a long time ago.”
BUFFETT: I didn't grasp it at first, but it's huge. The technological revolution will change the world in dramatic ways, and quickly. Ironically, however, our approach to dealing with that is just the opposite of Bill's. I look for businesses in which I think I can predict what they're going to look like in ten or 15 or 20 years. That means businesses that will look more or less as they do today, except that they'll be larger and doing more business internationally.
So I focus on an absence of change. When I look at the Internet, for example, I try and figure out how an industry or a company can be hurt or changed by it, and then I avoid it. That doesn't mean I don't think there's a lot of money to be made from that change, I just don't think I'm the one to make a lot of money out of it.
Take Wrigley's chewing gum. I don't think the Internet is going to change how people are going to chew gum. Bill probably does. I don't think it's going to change the fact that Coke will be the drink of preference and will gain in per capita consumption around the world; I don't think it will change whether people shave or how they shave. So we are looking for the very predictable, and you won't find the very predictable in what Bill does. As a member of society, I applaud what he is doing, but as an investor, I keep a wary eye on it.
GATES: This is an area where I agree strongly with Warren. I think the multiples of technology stocks should be quite a bit lower than the multiples of stocks like Coke and Gillette, because we are subject to complete changes in the rules. I know very well that in the next ten years, if Microsoft is still a leader, we will have had to weather at least three crises.
Charlie Munger
"All intelligent investing is value investing - to acquire more than you are paying for. Investing is where you find a few great companies and then sit on your ass."
-2000 Annual Meeting
"Think about it a little bit more and you'll agree with me, because you're smart and I'm right."
"If you don't get this elementary, but mildly unnatural, mathematics of elementary probability into your repertoire, then you go through a long life like a one legged man in an ass kicking contest. You're giving a huge advantage to everybody else."
"It’s not given to human beings to have such talent that they can just know everything all the time. But it is given to human beings who work hard at it – who look and sift the world for a mispriced bet – that they can occasionally find one. And the wise ones bet keenly when the world offers that opportunity. They bet big when they have the odds. And the rest of the time, they don’t. It’s just that simple." (Outstanding Investor Digest May 5, 1995.)
"There are huge advantages for an individual to get into a position where you make a few great investments and just sit back and wait."
"If you can find some fairly priced great company and buy it and sit, that tends to work out very, very well indeed."
"Understanding both the power of compound return and the difficulty of getting it is the heart and soul of understanding a lot of things."
"It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent."
"Well, I think there's one big truth that the typical investment counselor will have difficulty recognizing, but the guy who's investing his own money ought to have no trouble recognizing. If you're comfortably rich and you've got a way of investing your money that is overwhelmingly likely to keep you comfortably rich and someone else finds some rapidly growing something-or-other and is getting richer a lot faster than you are, that is not a big tragedy."
Ben Graham
"In the short run, the market is a voting machine but in the long run it is a weighing machine."
"Confronted with a challenge to distill the secret of sound investment into three words, we venture the motto, Margin of Safety."
"As long as the earnings power of his holdings remains satisfactory, the investor can give as little attention as he pleases to the vagaries of the stock market. More than that, at times he can use these vagaries to play the master game of buying low and selling high. The investor who permits himself to be stampeded or unduly worried by the unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. Price fluctuations have only one significant meaning for the true investor. They provide him with an opportunity to buy wisely when prices fall sharply and to sell wisely when they advance a great deal. At other times he will do better if he forgets about the stock market and pays attention to…the operating results of his companies."
"Observation over many years has taught us that the chief losses from investors come from the purchase of low-quality securities at times of favorable business conditions."
"The margin-of-safety idea becomes much more evident when we apply it to the field of undervalued or bargain securities. We have here, by definition, a favorable difference between price on the one hand and indicated or appraised value on the other. That difference is the safety margin. It is available for absorbing the effect of miscalculations or worse than average luck. The buyer of bargain issues places particular emphasis on the ability of the investment to withstand adverse developments." -The Intelligent Investor, pgs. 281-282.
Philip Fisher
"The stock market is filled with individuals who know the price of everything, but the value of nothing." -Common Stocks And Uncommon Profits
"The percentage of investors who own 25 or more different stocks is appalling. It is not this number of 25 or more which itself is appalling. Rather it is that in the great majority of instances only a small percentage of such holdings is in attractive stocks about which the investor has a high degree of knowledge. Investors have been so oversold on diversification that fear of having too many eggs in one basket has caused them to put far too little into companies they thoroughly know and far too much in others about which they know nothing at all. It never seems to occur to them that buying a company without having sufficient knowledge of it may be even more dangerous than having inadequate diversification."
"The investor cannot pinpoint just how much per share a particular company will earn two years from now. As a matter of fact, the company’s top management cannot. Under these circumstances, how can anyone say with even moderate precision just what is overpriced for an outstanding company with an unusually rapid growth rate? If the growth rate is so good that in another ten years the company might well have quadrupled, is it really of such great concern whether at the moment the stock might or might not be 35% overpriced? That which really matters is not to disturb a position that is going to be worth a great deal more later." -Common Stocks And Uncommon Profits
Peter Lynch
"There are 60,000 economists in the U.S., many of them employed full-time trying to forecast recessions and interest rates, and if they could do it successfully twice in a row, they'd all be millionaires by now...as far as I know, most of them are still gainfully employed, which ought to tell us something." -One Up On Wall Street
"Even the most thoughtful and steadfast investor is susceptible to the influence of skeptics who yell ‘Sell’ before it’s time to sell…We’ve all been taught the same adages: ‘Take profits when you can,’ and ‘A sure gain is always better than a possible loss.’ But when you’ve found the right stock and bought it, all the evidence tells you it’s going higher, and everything is working in your direction, then it’s a shame if you sell. A fivefold gain turns $10,000 into $50,000, but the next five folds turn $10,000 into $250,000. Investing in a 25-bagger is not a regular occurrence even among fund managers, and for the individual, it may only happen once or twice in a lifetime. When you’ve got one, you might as well enjoy the full benefit." -One Up on Wall Street
Bob Goldfarb (Sequoia Fund)
One could logically challenge my conclusion that retaining securities of outstanding companies with excellent growth prospects through periods of overvaluation will turn out to be the most profitable course to follow. One could argue that our investors would have been better off if we had sold Berkshire and Progressive at the end of 1998 and bought them back at much lower prices in subsequent years. However, one of the many
lessons that I have learned about investing from Charlie Munger is that finding and buying a great company at a great, or even a good, price is hard enough to do once. Buying a great company at the right time, selling it subsequently at the right time, and then buying it back at the right time would be winning a trifecta of difficult investment decisions. The odds are overwhelmingly against you winning that trifecta.
Living through that long dry spell is the price that long-term investors must willingly
pay if they believe that they own truly outstanding companies with the legs to go the
distance. The challenge is to differentiate those companies that are truly exceptional from the many pretenders and wanna-bees. http://www.sequoiafund.com/Reports/publications/03AnnMtg.pdf
John Neff
"I have read a good bit lately that low-P/E investing, the hallmark of traditional value investing, is dead. During my four decades as a professional investor, including three of them as manager of the Vanguard Windsor Fund (until I retired in December 1995), this sentiment surfaced repeatedly. Once again, these dismal reports are greatly exaggerated. Lucrative opportunities still await patient investors who stick to enduring principles. New twists on value investing invite disappointment."
"Low-P/E investing is not a casualty of the latest new era. Far from it. Stock market excesses invariably lead investors toward what is currently fashionable. Signaling the end of trends gone too far, inflection points mark broad shifts in investor sentiment, from bullish to bearish. They hand low-P/E investors the chance to capture extraordinary gains, when worthy, out-of-favor stocks regain the market's attention. Another new era won't erase this enduring principle."
"As bull markets progress, prevailing wisdom becomes a drumbeat that drowns out the argument for a low p/e strategy. Ironically, the merits of low p/e ratios are most compelling amid the clamor for hot stocks and hot sectors, but that is when investors are least likely to listen."
Yogi Berra
"You can observe a lot just by watching."
"If you can't imitate him, don't copy him."
"If you don't know where you are going, you will wind up somewhere else."
"If the fans don't come out to the ball park, you can't stop them."
Miscellaneous
"If everyone is thinking alike, no one is thinking.” -General George Patton
"The first principle is that you must not fool yourself and you're the easiest person to fool." -Richard Feynman
"What we see depends mainly on what we look for." -John Lubbock
"Leadership is a potent combination of strategy and character. But if you must be without one, be without the strategy." -General Norman Schwarzkopf
"Leadership is the art of getting someone else to do something you want done because he wants to do it." -Dwight D. Eisenhower
"He who tries to pick long-term value stocks must surely lead much more laborious days and run greater risks to his career than he who tries to guess better than the crowd, how the crowd will behave. Human nature desires quick results. There is a peculiar zest in making money quickly. It is the long-term investor who will, in practice, come in for the most criticism. If he is successful, that will only confirm the general belief in his rashness and, if in the short-run he is unsuccessful--which, of course, is very likely--he will not receive much mercy." -J. M. Keynes
"The harder you work the luckier you get." -Ben Franklin
"Pressure is what you feel when you don’t know what’s going on." -Chuck Knoll
"You may not realize it when it happens, but a kick in the teeth can be the best thing that ever happened for you." -Walt Disney
