Wall Street

First, many in Wall Street - a community in which quality control is not prized - will sell investors anything they will buy. Second, speculation is most dangerous when it looks easiest.

- Warren Buffett

Don't buy because it's cheap

You should not buy a stock because it's cheap but because you know a lot about it.

- Peter Lynch

Humour

An English baron came back home from his hunting expedition and found his wife in the arms of the local Bishop. To this he reacted in a strange way. He opened the window of his bedroom, the scene of the episcopal escapade, and began to bless the passers-by, as a Bishop would. This elicited indignant protests from the Bishop against a baron usurping his function. Thereupon the baron replied: "My Lord, if you are doing my work, shouldn’t I do yours?"

- Arthur Koestler

Seek the certainty

We are searching for operations that we believe are virtually certain to possess enormous competitive strength ten or twenty years from now. A fast-changing industry environment may offer the chance for huge wins, but it precludes the certainty we seek.

- Warren Buffett

What to seek in a business

Long-term competitive advantage in a stable industry is what we seek in a business. If that comes with rapid organic growth, great. But even without organic growth, such a business is rewarding. We will simply take the lush earnings of the business and use them to buy similar businesses elsewhere.

- Warren Buffett

The stocks to look out for

We like stocks that generate high returns on invested capital where there is a strong likelihood that it will continue to do so. For example, the last time we bought Coca-Cola, it was selling at about 23 times earnings. Using our purchase price and today’s earnings, that makes it about 5 times earnings. It’s really the interaction of capital employed, the return on that capital, and future capital generated versus the purchase price today.

- Warren Buffett

Read Playboy?

Some men read Playboy. I read financial reports.

- Warren Buffett

Avoid if it is subject to constant change

We try to stick to businesses we believe we understand. If a business is complex or subject to constant change, we're not smart enough to predict future cash flows.

- Warren Buffett

Independent directors

The current cry is for 'independent' directors. It is certainly true that it is desirable to have directors who think and speak independently - but they must also be business-savvy, interested and shareholder oriented.

- Warren Buffett

It's simple, but not easy

[An education in] investing requires only two courses: How to Value a Business, and How to Think About Markets. You don't have to know how to value all businesses. Start with a small circle of competence, things you can understand. [Look for] things that are selling for less than they're worth. Forget about things you can't understand. You need to understand accounting, which has enormous limitations. [You need to] understand when a competitive advantage is durable or fleeting. Learn that the market is there to serve you, not instruct you. In the investing business, if you have an IQ of 150, sell 30 points to someone else. You do not need to be a genius. You need to have emotional stability, inner peace and be able to think for yourself, [since] you're subjected to all sorts of stimuli. It's not a complicated game; you don't need to understand math. It's simple, but not easy.

- Warren Buffett

Seek information, not price history

We'll happily forgo knowing the price history and instead will seek whatever information will further our understanding of the company's business. After we buy a stock, consequently, we would not be disturbed if markets closed for a year or two.

- Warren Buffett

Investing is ...

Investing is where you find a few great companies and then sit on your ass.

- Charles Munger

How to become rich

I will tell you how to get rich. Go home, shut the door and be fearful when others are greedy and greedy when others are fearful.

- Warren Buffett

Recognize the good and the bad

I mean I'm not smarter than the market, but I can recognize a good tape and a bad tape. I recognize when it's right and when it's wrong and that's what my strength is.

- Jim Cramer

Study business failures than business successes

I've often felt there might be more to be gained by studying business failures than business successes. I my business, we try to study where people go astray, and why things don't work. We try to avoid mistakes. If my job was to pick a group of ten stock in the Dow Jones average that would outperform the average itself, I would probably not start by picking the ten best. Instead, I would try to pick the ten or fifteen worst performers and take them out of the sample, and work with the residual. It's a inversion process. Albert Einstein said, "Invert, always invert, in mathematics and physics," and it's a very good idea in business too. Start out with the failure, and then engineer its removal.

- Warren Buffett

Price fluctuations

Basically, 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 his dividend returns and to the operating results of his companies.

- Benjamin Graham

Holding stocks in high inflation period

Partly, it’s habit. Partly, it’s just that stocks mean business, and owning businesses is much more interesting than owning gold or farmland. Besides, stocks are probably still the best of all the poor alternatives in an era of inflation - at least they are if you buy in at appropriate prices (on why he holds stocks even in times of high inflation).

- Warren Buffett

Price, rather than time your purchases

We try to price, rather than time, purchases. In our view, it is folly to forego buying shares in an outstanding business whose long-term future is predictable, because of short-term worries about an economy or a stock market that we know to be unpredictable. Why scrap an informed decision because of an uninformed guess?

- Warren Buffett