"It's an old principle. You don't have to make it back the way that you lost it."
"Diversification is a protection against ignorance. It makes very little sense for thoe who know what they're doing."
"Stocks are simple. All you do is buy shares in a great business for less than the business is intrinsically worth, with managers of teh highest integrity and ability. Then you own those shares forever."
"Investing Rules: #1. Never lose money. #2 Never forget rule #1."
"Imagine that you are a student, and you may choose one other student in your class, and thereafter be entitled to 10 percent of that student's earnings for life. But there's a catch. You also have to choose a student to whom you will pay 10 percent of your earnings for life....the interesting thing is, when you think about what's going on in your mind, you're not thinking about things that are impossible for you to achieve yourself. You're not thinking about who can jump 7 feet, who can throw a football 65 feet, who can recite pi to 300 digits, or whatever it might be. You're thinking about a whole lot of qualities of character. the truth is, that every one of those qualities is obtainable. they are largely a matter of habit. My old boss, Ben Graham, when he was 12 years old, wrote down all of the qualities that he admired in other people and all the qualities he found objectionable. And he looked at that list, and there wasn't anything about being able to run the 100 yard dash in 9.6 seconds or jumping 7 feet. They were all things that were simply a matter of decicding whether you were going to be that kind of person or not."
When 20 year old Buffet went to work at his father's brokerage house in Omaha, a friend asked if the company would be called Buffet 7 son. "No", replied Buffet, "Buffet & Father."
When 26 year old Buffet created his first partnership in 1956, he told investors: "What I'll do is form a partnership where I'll manage the portfolio and I'll guarantee you a 5 percent return, and I'll get 20 percent of all profits after that. And I won't tell you what we own because that's distracting. All I want to do is hand in a scorecard when I come off the golf course. I don't want you following me around and watching me shank a three-iron on this hole and leave a putt short on the next one."
In 1993, when Buffet became the richest man in America, one of the people at his annual shareholder's meeting asked, 'Now that you've acheived the status of America's richest man, do you have any other goals? Buffet replied, "Oh, that's easy. To be America's oldest man."
"Berkshire buys when the lemmings are heading the other way."
"You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ eats the guy with the 130 IQ. Rationality is essential."
"Most people get intersted in stocks when everyone elses is. The time to be interested is when no one else is. You can't buy what is popular and do well."
"It doesn't have to be rock bottom to buy it. It has to be selling for less than you think the value of the business is, and it has to be run by honest and able people. But if you can buy into a business for less than it's worth today, and you're confident of the management, and you buy into a group of businesses like that, you're going to make money."
Buffet states, "I like to buy stocks when the bears are giving them away."
Mr. Market
Mr. Market was a character invented by Ben Graham to illuminate his students' minds regarding market behavior. The stock market should be viewed as an emotionally disturbed business partner. This partner, Mr. Market, shows up each day offering a price at which he will buy your share of the business or sell you his share. No matter how wild his offer is or how often you reject it, Mr. Market returns with a new offer the next day and each day thereafter. Buffet says the moral of the story is this: Mr. Market is your servant, not your guide.
"I never attempt to make money on the stock market. I buy on the assumption that they could close the market for 5 years and not reopen it for five years."
"When I worked for Graham-Newman, I asked Ben Graham, who then was my boss, 'How can an investor be sure that the price of a stock that is undervalued by the market evenutally will rise?', He just shrugged and replied that the market always evntually does. He was right in the short run, (the market is) a voting machine; in the long run, it's a weighing machine."
"(John Maynard) Keynes essentially said, don't try and figure out what the market is doing. Figure out a business you understand, and concentrate."
"For some reason, people take their cues from price action rather than from values. What doesn't work is when you start doing things that you don't understand or because they worked last week for somebody else. The dumbest reason in the world to buy a stock is because it's going up."
"The future is never clear; you pay a very high price in the stock market for a cheery concensus. Uncertainty actually is the friend of the buyer of long-term values."
"Charlies and I never have an opinion on the market because it wouldn't be any good and it might interfere with the opinions that we have that are good."
Valuing Stocks
"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 gernerated versus the purchase price today."
"If the business does well, the stock eventually follows."
"Risk comes from not knowing what you are buying."
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