Buffett Stock Quotes

If you aren't thinking about owning a stock for ten years, don't even think about owning it for ten minutes.

stocks of companies selling commodity-like products should come with a warning label: “Competition may prove hazardous to human wealth.

Sail the main course in a simple sturdy craft. Keep her well stocked with short stories and long laughs. Go fast enough to get there but slow enough to see. Moderation seems to be the key.

Buy a stock the way you would buy a house. Understand and like it such that you’d be content to own it in the absence of any market.

The attitude of our managers vividly contrasts with that of the young man who married a tycoon's only child, a decidedly homely and dull lass. Relieved, the father called in his new son- in-law after the wedding and began to discuss the future: Son, you're the boy I always wanted and never had. Here's a stock certificate for 50% of the company. You're my equal partner from now on.' Thanks, dad.' Now, what would you like to run? How about sales?' I'm afraid I couldn't sell water to a man crawling in the Sahara.' Well then, how about heading human relations?' I really don't care for people.' No problem, we have lots of other spots in the business. What would you like to do?' Actually, nothing appeals to me. Why don't you just buy me out?

The stock market is a device for transferring money from the impatient to the patient.

If you aren't willing to own a stock for ten years, don't even think about owning it for ten minutes.

Here is an all-too-brief summary of Buffett’s approach: He looks for what he calls “franchise” companies with strong consumer brands, easily understandable businesses, robust financial health, and near-monopolies in their markets, like H & R Block, Gillette, and the Washington Post Co. Buffett likes to snap up a stock when a scandal, big loss, or other bad news passes over it like a storm cloud—as when he bought Coca-Cola soon after its disastrous rollout of “New Coke” and the market crash of 1987. He also wants to see managers who set and meet realistic goals; build their businesses from within rather than through acquisition; allocate capital wisely; and do not pay themselves hundred-million-dollar jackpots of stock options. Buffett insists on steady and sustainable growth in earnings, so the company will be worth more in the future than it is today.

Buffett has said that the stock market is designed to transfer money “from the active to the patient.

Your goal as an investor should be simply to purchase, at a rational price, a part interest in an easily understood 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 those standards-so when you see one that qualifies, you should buy a meaningful amount of stock.

students need only two well-taught courses—How to Value a Business, and How to Think About Market Prices. 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. Though it’s seldom recognized, this is the exact approach

Every year Buffett explains that he wants Berkshire to have great long-term shareholders and that splitting the stock would only work against that.

automatically compound. If you need cash, you can sell stock and pay capital gains tax at a lower rate than a dividend would be taxed.

Yet he knew that stocks would be better than bonds or cash over the long run.

The valuation picture is very much affected by our zero-based interest rate structure. Clearly, stocks are worth far more when government bonds yield 1% than when they yield 5%.

There are certain things that cannot be adequately explained to a virgin either by words or pictures.

1. A stock must be managed by vigilant leaders. 2. A stock must have long-term prospects. 3. A stock must be stable and understandable. 4. A stock must be undervalued.

Stocks are the things to own over time. Productivity will increase and stocks will increase with it. There are only a few things you can do wrong. One is to buy or sell at the wrong time. Paying high fees is the other way to get killed. The best way to avoid both of these is to buy a low-cost index fund, and buy it over time. Be greedy when others are fearful, and fearful when others are greedy, but don’t think you can outsmart the market. “If a cross-section of American industry is going to do well over time, then why try to pick the little beauties and think you can do better? Very few people should be active investors.

Buffett reminded folks that to buy a stock is to buy part ownership of a business. Don’t get hung up on daily price quotes. Instead, think about business performance and what you would pay for the business, just as you would a farm.

Number one rule of Wall Street: Nobody - I don't care if you're Warren Buffett or Jimmy Buffett - Nobody knows if the stock's going to go up, down, sideways, or in fucking circles, least of all stockbrokers. It's all a Fugazzi. You know what a Fugazzi is?

As a value investor, your ideal situation is to find a company increasing its intrinsic value. Ideally, the company would be one with a declining stock price, thus creating an even better bargain as time unfolds. No one has employed these principles more effectively than Buffett and Munger.

You have to understand accounting and you have to understand the nuances of accounting. It's the language of business and it's an imperfect language, but unless you are willing to put in the effort to learn accounting - how to read and interpret financial statements - you really shouldn't select stocks yourself. - Warren Buffett

If the price of a particular stock is going up, we assume good things are happening; if the price starts to go down, we assume something bad is happening, and we act accordingly. It’s a poor mental habit, and it is exacerbated by another: evaluating price performance over very short periods of time. Not only are we depending solely on the wrong thing (price), Buffett would say, but we’re looking at it too often and we’re too quick to jump when we don’t like what we see. This double-barreled foolishness—this price-based, short-term mentality—is a flawed way of thinking, and it shows up at every level in our business. It is what prompts some people to check stock quotes every day, sometimes every hour.

Warren Buffett, chairman of Berkshire Hathaway and investor of legendary repute: "Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results (after fees and expenses) delivered by the great majority of investment professionals.

gold standard,” which the United States had dropped in 1933. Ever since, the Treasury had been printing money freely to finance first the New Deal and now the war. Howard feared that someday the United States might wind up like Germany in the 1920s, when people had to cart wheelbarrows of money down the street to buy a head of cabbage—the direct result of Germany being forced to deplete its gold stock to pay reparations after World War I.1 The economic chaos that resulted was one of the major factors that had led to Hitler.

financial markets will become divorced from reality — you can count on that. More Jimmy Lings will appear. They will look and sound authoritative. The press will hang on their every word. Bankers will fight for their business. What they are saying will recently have “worked.” Their early followers will be feeling very clever. Our suggestion: Whatever their line, never forget that 2+2 will always equal 4. And when someone tells you how old-fashioned that math is ---zip up your wallet, take a vacation and come back in a few years to buy stocks at cheap prices.

One example of a high-tech company that submits to a Graham type of analysis is Amazon.com. Though it does business exclusively on the Web, Amazon is essentially a retailer, and it may be evaluated in the same way as Wal-Mart, Sears, and so forth. The question, as always, is, does the business provide an adequate margin of safety at a given market price. For much of Amazon’s short life, the stock was wildly overpriced. But when the dot-com bubble burst, its securities collapsed. Buffett himself bought Amazon’s deeply discounted bonds after the crash, when there was much fearful talk that Amazon was headed for bankruptcy. The bonds subsequently rose to par, and Buffett made a killing.

Basically, Graham breaks the art of investing down into two simple variables – price and value. Value is what a business is worth. Price is what you have to pay to get it. Given the stock market’s manic-depressive behavior, numerous occasions arise where a business’ market price is distinctly out of line with its true business value. In such instances, an investor may be able to purchase a dollar of value for just 50 cents. Note that there is no mention here of interest rates, economic forecasts, technical charts, market cycles, etc. The only issues are price and value. I should also note that Graham emphasizes a large margin of safety. The strategy is not to buy a dollar of value for 97 cents. Rather, the gap should be dramatic so as to absorb the effects of miscalculation and worse-than-average luck.

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.

Course 1, Unit 1 Stock 101

Management and chairman of the Santa Fe Institute: “Buffett’s advice is so good but so hard. The point when there’s a valuation extreme is precisely the point when the emotional pull—in the wrong direction—is strongest.”11 Adds James Montier, portfolio manager at GMO: “People love extrapolation and forget that cycles exist. The good news is that you get paid for doing uncomfortable things, when stocks are at trough earnings and low multiples their implied return is high, in contrast you don’t get paid for

Charlie and I enjoy issuing Berkshire stock (for acquisitions) about as much as we relish prepping for a colonoscopy.” -2009 letter

Smith in his book and with his life is telling us how to live. Seek wisdom and virtue. Behave as if an impartial spectator is watching you. Use the idea of an impartial spectator to step outside yourself and see yourself as others see you. Use that vision to know yourself. Avoid the seductions of money and fame, for they will never satisfy. How to be virtuous is not so obvious, and that comes next. But I want to close this chapter with Peter Buffett, the man who ended up selling his Berkshire Hathaway stock for $90,000 and giving up the $100 million he could have had in order to pursue a career as a musician. A few years ago, Peter Buffett reflected on his decision to sell his Berkshire Hathaway stock to pursue his dreams in his memoir, Life Is What You Make It. He claims to have no regrets. But could a life as a successful musician possibly be worth giving up $100 million? Wouldn’t $100 million be even more pleasant? Then you ask yourself—what could he have with the extra millions? A nicer car? He could have a Lamborghini Veneno Roadster that retails for about $4 million. Or he could settle for the lovely Ferrari Spider, at $300,000; he could have a couple of those. He could have a mansion you and I can only imagine, anywhere in the world. Like Onassis, he could own an island or two rather than enduring the indignity of visiting an island in the Mediterranean, say, and having to share it with others while staying at a nice hotel. Could those physical pleasures possibly be worth sacrificing the life in music that he dreamed of and ultimately achieved? I think Peter Buffett got a bargain. He gave up $100 million and got something—hard as it is to imagine—that was even more precious. A good life. I think Adam Smith would agree with me.

Being right on a stock had something of the purity of a perfect move in chess; it had an intellectual resonance.

Once a bull market gets under way, and once you reach the point where everybody has made money no matter what system he or she followed, a crowd is attracted into the game that is responding not to interest rates and profits but simply to the fact that it seems a mistake to be out of stocks. In effect, these people superimpose an I-can’t-miss-the-party factor on top of the fundamental factors that drive the market. Like Pavlov’s dog, these “investors” learn that when the bell rings—in this case, the one that opens the New York Stock Exchange at 9:30 A.M.—they get fed. Through this daily reinforcement, they become convinced that there is a God and that He wants them to get rich.

From 1964, when Buffett began gobbling up businesses, through 2012, the value of Berkshire’s stock has soared 586,817 percent.2

Rather than attempt to time the market or pick individual stocks, it is more productive to invest and stay invested. As Warren Buffett said: “We continue to make more money when snoring than when active.” Mr. Buffett also said: “Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results (after expenses and fees) delivered by the great majority of investment professionals.

Most institutional and individual investors will find the best way to own common stock is through an index fund that charges minimal fees. Those following this path are sure to beat the net results [after fees and expenses] delivered by the great majority of investment professionals.”1 —Warren Buffett, chairman of Berkshire Hathaway

The evaluation of securities and businesses for investment purposes has always involved a mixture of qualitative and quantitative factors. At the one extreme, the analyst exclusively oriented to qualitative factors would say, “Buy the right company (with the right prospects, inherent industry conditions, management, etc.) and the price will take care of itself.” On the other hand, the quantitative spokesman would say, “Buy at the right price and the company (and stock) will take care of itself.” As is so often the pleasant result in the securities world, money can be made with either approach. And, of course, any analyst combines the two to some extent—his classification in either school would depend on the relative weight he assigns to the various factors and not to his consideration of one group of factors to the exclusion of the other group. Interestingly enough, although I consider myself to be primarily in the quantitative school (and as I write this no one has come back from recess—I may be the only one left in the class), the really sensational ideas I have had over the years have been heavily weighted toward the qualitative side where I have had a “high-probability insight.” This is what causes the cash register to really sing. However, it is an infrequent occurrence, as insights usually are, and, of course, no insight is required on the quantitative side—the figures should hit you over the head with a baseball bat. So the really big money tends to be made by investors who are right on qualitative decisions but, at least in my opinion, the more sure money tends to be made on the obvious quantitative decisions. As

Businesses are nothing more than purchasing stocks, and providing loans is nothing more than purchasing bonds.

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.

The availability of a quotation for your business interest (stock) should always be an asset to be utilized if desired. If it gets silly enough in either direction, you take advantage of it.”1 —

The course of the stock market will determine, to a great degree, when we will be right, but the accuracy of our analysis of the company will largely determine whether we will be right. In other words, we tend to concentrate on what should happen, not when it should happen.”7 This

The true investor scarcely ever is forced to sell his shares, and at all other times he is free to disregard the current price quotation. He need pay attention to it and act upon it only to the extent that it suits his book, and no more. Thus the investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. That man would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by other persons’ mistakes of judgment.10

I resurrect this “market-guessing” section only because after the Dow declined from 995 at the peak in February to about 865 in May, I received a few calls from partners suggesting that they thought stocks were going a lot lower. This always raises two questions in my mind: (1) if they knew in February that the Dow was going to 865 in May, why didn’t they let me in on it then; and, (2) if they didn’t know what was going to happen during the ensuing three months back in February, how do they know in May? There is also a voice or two after any hundred point or so decline suggesting we sell and wait until the future is clearer. Let me again suggest two points: (1) the future has never been clear to me (give us a call when the next few months are obvious to you—or, for that matter the next few hours); and, (2) no one ever seems to call after the market has gone up one hundred points to focus my attention on how unclear everything is, even though the view back in February doesn’t look so clear in retrospect. If

If a 20% or 30% drop in the market value of your equity holdings (such as BPL) is going to produce emotional or financial distress, you should simply avoid common stock type investments. In the words of the poet—Harry Truman—“If you can’t stand the heat, stay out of the kitchen.” It is preferable, of course, to consider the problem before you enter the “kitchen.

You can gain great insights about investing from a careful study of Buffett’s Generals. He was constantly appraising the value of as many stocks as he could find, looking for the ones where he felt he had a reasonable ability to understand the business and come up with an estimate for its worth. With a prodigious memory and many years of intense study, he built up an expansive memory bank full of these appraisals and opinions on a huge number of companies. Then, when Mr. Market offered one at a sufficiently attractive discount to its appraised value, he bought it; he often concentrated heavily in a handful of the most attractive ones. Good valuation work and proper temperament have always been the two keys pillars of his success as an investor. Buffett

a declining Dow gives us our chance to shine and pile up the percentage advantages which, coupled with only an average performance during advancing markets, will give us quite satisfactory long-term results. Our target is an approximately ½% decline for each 1% decline in the Dow and if achieved, means we have a considerably more conservative vehicle for investment in stocks than practically any alternative.8 Buffett

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. For the investor, a too-high purchase price for the stock of an excellent company can undo the effects of a subsequent decade of favorable business developments.

Warren Buffett wird nicht müde zu betonen, dass es an ihm ist, sich selbst die Verwaltung des kleinsten Geldbetrages sehr angelegen sein zu lassen. Und eben darin bekundet sich jenes Verantwortungsbewusstsein, mit dem Staat zu machen ist.

Jason Zweig, senior writer and columnist at Money magazine and coauthor of the revised edition of Benjamin Graham's classic, The Intelligent Investor: "If you buy-and then hold-a total stock market index fund, it is mathematically certain that you will outperform the vast majority of all other investors in the long run. Graham praised index funds as the best choice for individual investors, as does Warren Buffett.

But it is the long-term merits of the index fund—broad diversification, weightings paralleling those of the stocks that comprise the market, minimal portfolio turnover, and low cost—that commend it to wise investors. Consider these words from perhaps the wisest investor of all, Warren E. Buffett, from the 1996 Annual Report of Berkshire Hathaway Corporation: Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results (after fees and expenses) delivered by the great majority of investment professionals.

you can think better about the market; you don’t hear so many stories, and you can just sit and look at the stock on the desk in front of you. You can think about a lot of things.” 32   Buffett

Of all the professional money managers, Warren Buffett’s record stands out as the most extraordinary. For over 40 years, Buffett’s company, Berkshire Hathaway, has earned a rate of return for his stockholders twice as large as the stock market as a whole. But that record was not achieved only by his ability to purchase “undervalued” stocks, as it is often portrayed in the press. Buffett buys companies and holds them. (He has suggested that the correct holding period for a stock is forever.)

Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be misappraised.

We select our marketable equity securities in much the same way we would evaluate a business for acquisition in its entirety. We want the business to be (1) one we can understand, (2) with favorable long-term prospects, (3) operated by honest and competent people, and (4) available at a very attractive price. We ordinarily make no attempt to buy equities for anticipated favorable stock price behavior in the short term. In fact, if their business experience continues to satisfy us, we welcome lower market prices of stocks we own as an opportunity to acquire even more of a good thing at a better price. 1977

By the late 1960s, however, the rising market had made investing in stocks less viable. The advantage of celebrity when trying to buy entire businesses began to outweigh the benefit of secrecy in buying stocks.

The fact is almost anyone can achieve positive absolute returns in a trending up market. Watch TV and listen to market pundits, buy the hot stocks of the day, and ignore valuation. Growth and momentum have been the lessons learned by new portfolio managers in the 2010s. Only when the tide goes out, do you discover who has been swimming naked. —Warren Buffett When the tide goes out, good investors create outperformance. Global central banks have made sure the tide has not gone out for a decade. US equity market drawdowns of more than 10% have occurred only four times in the last decade and each drawdown has lasted less than 60 days.

When you build a bridge, you insist that it can carry 30,000 pounds, but you only drive 10,000 pound trucks across it. You require a margin of safety, and rightly so.” Warren Buffett

With Berkshire Hathaway’s stock, Buffett had a publicly traded corporation with captive capital.

We have to decide whether we can sensibly estimate an earnings range for five years out, or more. If the answer is yes, we will buy the stock (or business) if it sells at a reasonable price in relation to the bottom boundary of our estimate.

After Buffett finished undergrad at University of Nebraska in Lincoln, he was working as a stockbroker, which essentially means he was a stock salesman. Though nearly every time Buffett tried to get a meeting with a businessperson in Omaha, he was turned down. No one wanted to meet with a young guy with no credibility, trying to sell them stocks. So Buffett changed his approach—he began calling up businesspeople and made them feel he could save them money on their taxes. All of a sudden the businesspeople said, “Come on in!” And just like that, Buffett booked his meetings. “This is the thing,” I told Corwin. “Although people won’t meet with you for the reason you want, that doesn’t mean they won’t meet at all. Just find another angle.

This is often referred to as the “earnings yield” of a stock. You can calculate it in one of 2 ways: 1. Earnings per share divided by the stock’s price per share 2. Net profit divided by the market cap

Buy into a company because you want to own it, not because you want the stock to go up.

Always remember that when you are buying a stock, you are really buying part ownership of a business.

Financial strength and capital structure. The most basic possible definition of a good business is this: It generates more cash than it consumes. Good managers keep finding ways of putting that cash to productive use. In the long run, companies that meet this definition are virtually certain to grow in value, no matter what the stock market does. Start by reading the statement of cash flows in the company’s annual report. See whether cash from operations has grown steadily throughout the past 10 years. Then you can go further. Warren Buffett has popularized the concept of owner earnings, or net income plus amortization and depreciation, minus normal capital expenditures. As portfolio manager Christopher Davis of Davis Selected Advisors puts it, “If you owned 100% of this business, how much cash would you have in your pocket at the end of the year?” Because it adjusts for accounting entries like amortization and depreciation that do not affect the company’s cash balances, owner earnings can be a better measure than reported net income. To fine-tune the definition of owner earnings, you should also subtract from reported net income: any costs of granting stock options, which divert earnings away from existing shareholders into the hands of new inside owners any “unusual,” “nonrecurring,” or “extraordinary” charges any “income” from the company’s pension fund. If owner earnings per share have grown at a steady average of at least 6% or 7% over the past 10 years, the company is a stable generator of cash, and its prospects for growth are good.

Research and development conducted by private companies in the United States has grown enormously over the past four decades. We have substantially replaced the publicly funded science that drove our growth after World War II with private research efforts. Such private R&D has shown some impressive results, including high average returns for the corporate sector. However, despite their enormous impact, these private R&D investments are much too small from a broader perspective. This is not a criticism of any individuals; rather, it is simply a feature of the system. Private companies do not capture the spillovers that their R&D efforts create for other corporations, so private sector executives in established firms underinvest in invention. The venture capital industry, which provides admirable support to some start-ups, is focused on fast-impact industries, such as information technology, and not generally on longer-run and capital-intensive investments like clean energy or new cell and gene therapies. Leading entrepreneur-philanthropists get this. In recent years, there have been impressive investments in science funded by publicly minded individuals, including Eric Schmidt, Elon Musk, Paul Allen, Bill and Melinda Gates, Mark Zuckerberg, Michael Bloomberg, Jon Meade Huntsman Sr., Eli and Edythe Broad, David H. Koch, Laurene Powell Jobs, and others (including numerous private foundations). The good news is that these people, with a wide variety of political views on other matters, share the assessment that science—including basic research—is of fundamental importance for the future of the United States. The less good news is that even the wealthiest people on the planet can barely move the needle relative to what the United States previously invested in science. America is, roughly speaking, a $20 trillion economy; 2 percent of our GDP is nearly $400 billion per year. Even the richest person in the world has a total stock of wealth of only around $100 billion—a mark broken in early 2018 by Jeff Bezos of Amazon, with Bill Gates and Warren Buffett in close pursuit. If the richest Americans put much of their wealth immediately into science, it would have some impact for a few years, but over the longer run, this would hardly move the needle. Publicly funded investment in research and development is the only “approach that could potentially return us to the days when technology-led growth lifted all boats. However, we should be careful. Private failure is not enough to justify government intervention. Just because the private sector is underinvesting does not necessarily imply that the government will make the right investments.

Security Analysis” by Benjamin Graham, “The Single Best Investment” by Lowell Miller, “The Snowball Effect” by Timothy J McIntosh, “Berkshire Hathaway Letters to Shareholders” by Warren Buffett and Max Olson, “The Ultimate Dividend Playbook: Income, Insight and Independence for Today’s Investor” by Morningstar and Josh Peters.

To summarize, a great business will show the following characteristics in its financial statements: Earnings show a smooth upward trend Consistent return on equity (ROE) greater than 20% Consistent return on total capital (ROTC) greater than 15% Long-term debt less than 4 times earnings Pays a dividend and/or buys back stock

Seasoned investors like Warren Buffett, Thomas Rowe Price Jr., John Neff, Jesse Livermore, Peter Lynch, and many more, practice this strategy of finding the best available alternative before investing a considerable sum.

Warren Buffett, chairman of Berkshire Hathaway and investor of legendary repute: “Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results (after fees and expenses) delivered by the great majority of investment professionals.

One of the most fundamental concepts of making money in the stock market is buying a company that you can hold forever.

The point of this exercise is to allow you the opportunity to understand a very important term that is used in calculating the value of your future stock picks: equity. Just as you calculated your own equity, businesses do the exact same thing every quarter (or every three months).

the success of a stock pick heavily relies on the purchase price as much as the productivity of the already-successful business.

Simply estimate where earnings per share (EPS) will be in 5 years from now. Slap a 15 multiple (P/E) on that number and you have a reasonable price target for the stock. Warren Buffett uses a similar trick all the time.

For indisputably skilled investors like Warren Buffett, wide diversification would be foolish, since it would water down the concentrated force of a few great ideas. But for the typical fund manager or individual investor, not diversifying is foolish, since it is so difficult to select a limited number of stocks that will include most winners and exclude most losers. As you own more stocks, the damage any single loser can cause will decline, and the odds of owning all the big winners will rise. The ideal choice for most investors is a total stock market index fund, a low-cost way to hold every stock worth owning.

Stocks During Fear Cycles (Recessions): These are the least risky and most profitable times for purchasing stock. During Greed Cycles (Bull Markets): These are the most risky and least profitable times for purchasing stocks. Bonds During Fear Cycles (Recessions): These are the most risky and least profitable times for purchasing bonds.

We don’t buy and sell stocks based upon what other people think the stock market is going to do (I never have an opinion) but rather upon what we think the company is going to do.

CBS spent much of the 1960s and 1970s taking the enormous cash flow generated by its network and broadcast operations and funding an aggressive acquisition program that led it into entirely new fields, including the purchase of a toy business and the New York Yankees baseball team. CBS issued stock to fund some of these acquisitions, built a landmark office building in midtown Manhattan at enormous expense, developed a corporate structure with forty-two presidents and vice presidents, and generally displayed what Buffett’s partner, Charlie Munger, calls “a prosperity-blinded indifference to unnecessary costs.”1

1. Investors give fund managers money at the wrong time. Now that you’ve had some time to read this book and understand the importance of buying stocks during fear cycles and holding during greed cycles, this first indicator should make sense. To understand this principle, imagine that you’re the fund manager of a $100 billion investment fund. When the stock market crashes and you’re able to purchase severely undervalued businesses with minimal debt, not only do you lack funds to invest, but all your resources are being depleted by scared investors. Instead of receiving money to buy the great deals, your investors are selling their shares in the fund and you don’t have the capacity to take advantage of the market behavior. This reason alone severely handicaps fund managers as they attempt to beat the market.

Skilled investors can maximize their long-term performance by maximizing the margin of safety of each stock held in the portfolio, which is to say, by concentrating on the best ideas. To be “skilled,” an investor must be able to identify which stocks are more undervalued than others, and then construct a portfolio containing only the most undervalued stocks. In doing so, investors take on the risk that an unforeseeable event leads to an unrecoverable loss in the intrinsic value of any single holding, perhaps through financial distress or fraud. This unrecoverable diminution in intrinsic value is referred to in the value investing literature as a permanent impairment of capital, and it is the most important consideration for value investors. Value investors distinguish the partial or total diminution in the firm’s underlying value, which is a risk to be considered, from a mere drop in the share price, no matter how significant the drop may be, which is an event to be ignored or exploited. The extent to which the portfolio value is impacted by a portfolio holding suffering a permanent impairment of capital will depend on the size of the holding relative to the portfolio value—the bigger the holding, the greater the impact on the portfolio. Thus the more concentrated an investor becomes, the greater the need to understand individual holdings. Says Buffett of the “know-something” investor:28 [If] you are a know-something investor, able to understand business economics and to find five to 10 sensibly priced companies that possess important

An even easier route might be to just buy some B-shares of Berkshire Hathaway (ticker: BRK-B). One share of stock in this company will cost you $203.27 today. You can then sit back and relax and let Warren Buffett, Charlie Munger, and their successors do all of the hard work.

Stocks are ownership shares of businesses,” which “you’re valuing and trying to buy at a discount.” The key, then, is to identify situations in which there’s a particularly large spread between the price and the value of the business. That spread gives you a margin of safety, which Greenblatt (like Graham and Buffett) regards as the single most important concept in investing.

But in More Stock Investing For Beginners we get into what I call the Warren Buffett mindset. It goes something like this. Just because the stock is selling for $ 5.17 right now doesn’t mean you can’t put an order in for $ 5.00.

Vigilant leadership Long-term prospects Stock stability Buy at attractive prices.

Along with his Company A and Company B teaching method, Graham used to talk about Class 1 and Class 2 truths. Class 1 truths were absolutes. Class 2 truths became truths by conviction. If enough people thought a company’s stock was worth X, it became worth X until enough people thought otherwise. Yet that did not affect the stock’s intrinsic value—which was a Class 1 truth.

Over the past 15 years, both Internet stocks and houses have demonstrated the extraordinary excesses that can be created by combining an initially sensible thesis with well-publicized rising prices. In these bubbles, an army of originally skeptical investors succumbed to the “proof” delivered by the market, and the pool of buyers — for a time — expanded sufficiently to keep the bandwagon rolling. But bubbles blown large enough inevitably pop. And then the old proverb is confirmed once again: “What the wise man does in the beginning, the fool does in the end.

Since I entered the business world, conglomerates have enjoyed several periods of extreme popularity, the silliest of which occurred in the late 1960s. The drill for conglomerate CEOs then was simple: By personality, promotion or dubious accounting — and often by all three — these managers drove a fledgling conglomerate’s stock to, say, 20 times earnings and then issued shares as fast as possible to acquire another business selling at ten-or-so times earnings. They immediately applied “pooling” accounting to the acquisition, which — with not a dime’s worth of change in the underlying businesses — automatically increased per-share earnings, and used the rise as proof of managerial genius. They next explained to investors that this sort of talent justified the maintenance, or even the enhancement, of the acquirer’s p/e multiple. And, finally, they promised to endlessly repeat this procedure and thereby create ever-increasing per-share earnings.

If an investor’s entry point into Berkshire stock is unusually high — at a price, say, approaching double book value, which Berkshire shares have occasionally reached — it may well be many years before the investor can realize a profit. In other words, a sound investment can morph into a rash speculation if it is bought at an elevated price. Berkshire is not exempt from this truth.

Investing is an activity in which consumption today is foregone in an attempt to allow greater consumption at a later date. “Risk” is the possibility that this objective won’t be attained. By that standard, purportedly “risk-free” long-term bonds in 2012 were a far riskier investment than a long- term investment in common stocks. At that time, even a 1% annual rate of inflation between 2012 and 2017 would have decreased the purchasing-power of the government bond

So far in 2008, the company had spent more than $3 billion buying its own stock. And in 2007, GE had spent $15 billion on its shares. Over the entire period, GE paid an average price of about $37.50 for half a million shares worth more than $18 billion. Now, it would sell almost 550,000 shares back to the market for $22.25 a share in order to raise $12.2 billion. By selling shares back to the market at a much lower price, GE was wiping out more than twice the amount of cash that the deal with Buffett had yielded. It was a disastrous use of the equity markets, and it wouldn’t be the last time.

On 3 timeless ideas for investing Benjamin Graham, three fundamentally basic ideas: 1. You should look at stocks as part of ownership of a business. 2. You should look at market fluctuations in terms of his "Mr. Market" example & make them your friend rather than your enemy by essentially profiting from folly rather participating in it, & finally, 3. The 3 most important words in investing are "margin of safety" - ...always building a 15,000 pound bridge if you're going to be driving 10,000 pound truck across it...

the difference between interest rates creates a disparity between price and value. This disparity is where an investor makes money—especially in the stock market

THE FOLLOWING DAY, the Apple share price fell 10 percent and the company lost $75 billion in value. The single-day decline was Apple’s biggest in six years and sank its valuation to a level it had not seen since February 2017. It shook the U.S. economy. The company had become one of the most widely held institutional stocks, included in mutual funds, index funds, and 401(k)s. Thanks in part to Warren Buffett and Berkshire Hathaway, everyone from grandmothers in Florida to autoworkers in the Midwest had an interest in Apple’s business. They all suffered.

it's rather interesting because one of the greatest economists of the world is a substantial shareholder in Berkshire Hathaway and has been from the very early days after Buffett was in control. His textbook always taught that the stock market was perfectly efficient and that nobody could beat it.But his own money went into Berkshire and made him wealthy. So, like Pascal in his famous wager, he hedged his bet.The iron rule of life is that only twenty percent of the people can be in the top fifth Is the stock market so efficient that people can't beat it? Well, the efficient market theory is obviously roughly right-meaning that markets are quite efficient and it's quite hard for anybody to beat the market by significant margins as a stock picker by just being intelligent and working in a disciplined way.Indeed, the average result has to be the average result. By definition, everybody can't beat the market.

I’m convinced that there is much inefficiency in the market. These Graham-and-Doddsville investors have successfully exploited gaps between price and value. When the price of a stock can be influenced by a “herd” on Wall Street with prices set at the margin by the most emotional person, or the greediest person, or the most depressed person, it is hard to argue that the market always prices rationally. In fact, market prices are frequently nonsensical.

As he absorbs what he is hearing, David muses that just this morning he was taught that fundraising is part of the lifeblood of a private equity firm—and yet here he is working on a secret plan for a version of…immortality. Management fees without the ticking clock of a finite fund life, helping to drive the Firm’s stock price higher as the Firm’s profits increase year after year. The concept is not new; it is inspired by Berkshire Hathaway, the listed investment vehicle led by Warren Buffett. But the application to private equity firms is novel, and at this stage, none of the Firm’s rivals are focused on it.

Derivatives spread the damage throughout the world. In March 2009, when the S&P 500 had fallen 57 percent from its peak, I could not tell whether to buy stocks or to sell what I had. Either decision might have been a disaster. If we continued into a major worldwide depression, buying more would be costly. In the other scenario, the one that occurred, this was the bottom, and stocks rebounded over 70 percent in less than a year. Warren Buffett, who had better information and insight than almost anyone, later told The Wall Street Journal’s Scott Patterson that at one point he was looking into the abyss and considering the possibility that everything could go down, even Berkshire Hathaway. It was only when the US government indicated it would do whatever was necessary to bail out the financial system that he realized we were saved.

But being short something where your loss is unlimited is quite different than being long something that you’ve already paid for. And it’s tempting. You see way more stocks that are dramatically overvalued in your career than you will see stocks that are dramatically undervalued. I mean there — it’s the nature of securities markets to occasionally promote various things to the sky, so that securities will frequently sell for 5 or 10 times what they’re worth, and they will very, very seldom sell for 20 percent or 10 percent of what they’re worth. So, therefore, you see these much greater discrepancies between price and value on the overvaluation side. So you might think it’s easier to make money on short selling. And all I can say is, it hasn’t been for me. I don’t think it’s been for Charlie. It is a very, very tough business because of the fact that you face unlimited losses, and because of the fact that people that have overvalued stocks — very overvalued stocks — are frequently on some scale between promoter and crook. And that’s why they get there. And once there — And they also know how to use that very valuation to bootstrap value into the business, because if you have a stock that’s selling at 100 that’s worth 10, obviously it’s to your interest to go out and issue a whole lot of shares. And if you do that, when you get all through, the value can be 50. In fact, there’s a lot of chain letter-type stock promotions that are sort of based on the implicit assumption that the management will keep doing that. And if they do it once and build it to 50 by issuing a lot of shares at 100 when it’s worth 10, now the value is 50 and people say, “Well, these guys are so good at that. Let’s pay 200 for it or 300,” and then they could do it again and so on. It’s not usually that — quite that clear in their minds. But that’s the basic principle underlying a lot of stock promotions. And if you get caught up in one of those that is successful, you know, you can run out of money before the promoter runs out of ideas. In the end, they almost always work. I mean, I would say that, of the things that we have felt like shorting over the years, the batting average is very high in terms of eventual — that they would work out very well eventually if you held them through. But it is very painful and it’s — in my experience, it was a whole lot easier to make money on the long side.

Legg Mason was a value shop, and its training program emphasized the classic works on value investing, including Benjamin Graham and David Dodd’s Security Analysis and Graham’s The Intelligent Investor. Each day, the firm’s veteran brokers would stop by and share their insights on stocks and the market. They handed us a Value Line Investment Survey of their favorite stock. Each company possessed the same attributes: a low price-to-earnings ratio, a low price-to-book ratio, and a high dividend yield. More often than not, the company was also deeply out of favor with the market, as evidenced by the long period the stock had underperformed the market. Over and over again, we were told to avoid the high-flying popular growth stocks and instead focus on the downtrodden, where the risk-reward ratio was much more favorable.