Value Investing

25 Pages of the Best Value Investing Quotes (PAGE WILL LOAD SLOWLY)

“Managers thinking about accounting issues should never forget one of Abraham Lincoln’s favorite riddles: `How many legs does a dog have if you call his tail a leg?’ The answer: `Four, because calling a tail a leg does not make it a leg’.”

Arbitrage:

“Berkshire’s arbitrage activities differ from those of many arbitrageurs. First, we participate in only a few, and usually very large, transactions each year. Most practitioners buy into a great many deals perhaps 50 or more per year. With that many irons in the fire, they must spend most of their time monitoring both the progress of deals and the market movements of the related stocks. This is not how Charlie nor I wish to spend our lives. (What’s the sense in getting rich just to stare at a ticker tape all day?)”

Billionaires:

“Of the billionaires I have known, money just brings out the basic traits in them. If they were jerks before they had money, they are simply jerks with a billion dollars.”

Brand:

“Your premium brand had better be delivering something special, or it’s not going to get the business.”

Bridge

“It’s got to be the best intellectual exercise out there. You’re seeing through new situations every ten minutes…In the stock market you don’t base your decisions on what the market is doing, but on what you think is rational….Bridge is about weighing gain/loss ratios. You’re doing calculations all the time.” Forbes. June 2, 1997. http://www.buffettcup.com/Default.aspx?tabid=69

“The approach and strategies are very similar in that you gather all the information you can and then keep adding to that base of information as things develop. You do whatever the probabilities indicated based on the knowledge that you have at that time, but you are always willing to modify your behaviour or your approach as you get new information. In bridge, you behave in a way that gets the best from your partner. And in business, you behave in the way that gets the best from your managers and your employees.” Buffett on Bridge

“I wouldn’t mind going to jail if I had three cellmates who played bridge” http://www.buffettcup.com/Default.aspx?tabid=69

“I spend twelve hours a week – a little over 10% of my waking hours – playing the game. Now I am trying to figure out how to get by on less sleep in order to fit in a few more hands.”

http://www.buffettcup.com/Default.aspx?tabid=69

Investing is not as tough as being a top-notch bridge player. All it takes is the ability to see things as they really are.

Bubbles:

“Unfortunately, the hangover may prove to be proportional to the binge.”- March 2003

“Like most trends, at the beginning it’s driven by fundamentals, at some point speculation takes over. What the wise man does in the beginning, the fool does in the end.”  2006 Berkshire Hathaway annual meeting

“The world went mad. What we learn from history is that people don’t learn from history.”

Bull Markets
“In a bull market, one must avoid the error of the preening duck that quacks boastfully after a torrential rainstorm, thinking that its paddling skills have caused it to rise in the world. A right-thinking duck would instead compare its position after the downpour to that of the other ducks on the pond.” Letter to Berkshire Hathaway shareholders, 1997

Business:

“Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.”

If a business does well, the stock eventually follows.”

Business School:

“The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.”

Circle of Competence

“There are all kinds of businesses that Charlie and I don’t understand, but that doesn’t cause us to stay up at night. It just means we go on to the next one, and that’s what the individual investor should do.” 

Compensation:

“The .350 hitter expects, and also deserves, a big payoff for his performance – even if he plays for a cellar-dwelling team. And a .150 hitter should get no reward – even if he plays for a pennant winner.”

“Too often, executive compensation in the U.S.is ridiculously out of line with performance. That won’t change, moreover, because the deck is stacked against investors when it comes to the CEO’s pay.”
– Warren Buffett; 2005 Letter to Shareholders

Complexity:

“There seems to be some perverse human characteristic that likes to make easy things difficult.”

Crowds:

“You can’t buy what is popular and do well.”

“Most people get interested in stocks when everyone else is. The time to get interested is when no one else is.”

“You’re neither right nor wrong because other people agree with you. You’re right because your facts are right and your reasoning is right—and that’s the only thing that makes you right. And if your facts and reasoning are right, you don’t have to worry about anybody else.”

“A public-opinion poll is no substitute for thought.”

“The most common cause of low prices is pessimism-some times pervasive, some times specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It’s optimism that is the enemy of the rational buyer.” – 1990 Chairman’s Letter

“If you expect to be a net saver during the next 5 years, should you hope for a higher or lower stock market during that period?”Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall.”This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.”- 1997 Chairman’s Letter to Shareholders

Debt:

“We will reject interesting opportunities rather than over-leverage our balance sheet.”BerkshireHathaway Owners Manual

Decisions

“Charlie and I decided long ago that in an investment lifetime it’s too hard to make hundreds of smart decisions. That judgement became ever more compelling asBerkshire’s capital mushroomed and the universe of investments that could significantly affect our results shrank dramatically. Therefore, we adopted a strategy that required our being smart – and not too smart at that – only a very few times. Indeed, we’ll now settle for one good idea a year. (Charlie says it’s my turn.)”

Diversification

“The strategy we’ve adopted precludes our following standard diversification dogma. Many pundits would therefore say the strategy must be riskier than that employed by more conventional investors. We disagree. We believe that a policy of portfolio concentration may well decrease risk if it raises, as it should, both the intensity with which an investor thinks about a business and the comfort-level he must feel with its economic characteristics before buying into it.”- 1993 Chairman’s Letter to Shareholders

“Diversification is a protection against ignorance. It makes very little sense for those who know what they’re doing.” 1993 Chairman’s Letter to Shareholders.

“Why not invest your assets in the companies you really like? As Mae West said, “Too much of a good thing can be wonderful”.

Efficient Market Hypothesis

“I’d be a bum on the street with a tin cup if the markets were always efficient.” Fortune April 3, 1995

“Ben’s Mr. Market allegory may seem out-of-date in today’s investment world, in which most professionals and academicians talk of efficient markets, dynamic hedging and betas. Their interest in such matters is understandable, since techniques shrouded in mystery clearly have value to the purveyor of investment advice. After all, what witch doctor has ever achieved fame and fortune by simply advising ‘Take two aspirins’?”- 1987 Chairman’s Letter to Shareholders

Emotions

“The most important quality for an investor is temperament, not intellect… You need a temperament that neither derives great pleasure from being with the crowd or against the crowd.”

Ethics:

“I won’t close down a business of subnormal profitability merely to add a fraction of a point to our corporate returns. I also feel it inappropriate for even an exceptionally profitable company to fund an operation once it appears to have unending losses in prospect. Adam Smith would disagree with my first proposition and Karl Marx would disagree with my second; the middle ground is the only position that leaves me comfortable. “

Experience

“Can you really explain to a fish what it’s like to walk on land? One day on land is worth a thousand years of talking about it, and one day running a business has exactly the same kind of value.”