Lousy teacher

Success is a lousy teacher. It seduces smart people into thinking they can't lose.

-Bill Gates

What you should buy

Over the long term, it's hard for a stock to earn a much better return than the business which underlies it earns. If the business earns 6% on capital over 40 years and you hold it for that 40 years, you're not going to make much different than a 6% return - even if you originally buy it at a huge discount. Conversely, if a business earns 18% on capital over 20 or 30 years, even if you pay an expensive looking price, you'll end up with a fine result.

- Charles Munger

Inactivity also plays a part in successful investing

With short-term money returning less than 1 percent after-tax, sitting it out is no fun. But occasionally successful investing requires inactivity.

- Warren Buffett

Margin of Safety is not the one and only to consider

Even with a margin [of safety] in the investor's favor, an individual security may work out badly. For the margin guarantees only that he has a better chance for profit than for loss - not that loss is impossible. But as the number of such commitments is increased the more certain does it become that the aggregate of the profits will exceed the aggregate of the losses.

- Benjamin Graham

Easy ones in business are much better

But the interesting thing about business, it's not like the Olympics. In the Olympics, you know, if you do some dive off the - on a high board and have four or five twists - on the way down, and you go in the water a little bad, there's a degree of difficulty factor. So you'll get more points than some guy that just does a little headfirst dive in perfectly.

So degree of difficulty counts in the Olympics. It doesn't count in business. Now, you don't get any extra points for the fact that something's very hard to do. So you might as well just step over one-foot bars instead of trying to jump over seven-foot bars.

- Warren Buffett

Look for the moat

We don't do due diligence or go out kicking tires. It doesn't matter. What matters is understanding the competitive dynamics of a business. We can't be taken by a guy with a sales pitch... What really counts is the presence of a competitive advantage. You want a business with a big castle and a moat around it, and you want that moat to widen over time. Coke and Kodak both had marvelous moats 20 or 25 years ago. Kodak's has narrowed, while Coke has been building its moat. We want an economic castle.

- Warren Buffett

When to buy

The best thing that happens to us is when a great company gets into temporary trouble... We want to buy them when they're on the operating table.

- Warren Buffett