”[37]
“We learned to build our emotional muscles, helping us make it through major market falls and grind through the trying times without losing our equilibrium.” – Richard Chandler[38]
“The market gives you the opportunity to arbitrage what the emotional investor will pay or sell at versus the fundamental value of a company, but you’ve got to pull the trigger promptly without hesitating. We’ve disciplined ourselves mentally and prepared ourselves in terms of information, as well as relationships with brokers, to do that.” – Richard Chandler[39]
“Never underestimate the gullibility of large pools of money.” — David Swensen[40]
“We’re in the business not so much of being contrarians deliberately, but rather we like to take perceived risk instead of actual risk. And what I mean by that is that you get paid for taking a risk that people think is risky, you particularly don’t get paid for taking actual risk.” – Wilbur Ross
“Investment is the discipline of relative selection.” Sid Cottle
“Those who spend too much will eventually be owned by those who are thrifty.” – John Templeton
“Risk means more things can happen than will happen.” – Peter Bernstein
“What if I am wrong? Any rational investment plan has to start with that question.” -Peter L. Bernstein
“If everyone thinks one way, it is likely to be wrong. If you can figure out that it is wrong, you are likely to make a lot of money.” – Jim Rogers
“Markets look a lot less efficient from the banks of the Hudsonthan the banks of the Charles.” – Fischer Black[41]
“Anyone who believes a growth rate in excess of 15% per annum over the long term is attainable should pursue a career in sales, but avoid one in mathematics.” – Warren Buffett
“They are not new lessons. Never owe any money you can’t pay tomorrow morning. Never let the markets dictate your actions. Always be in a position to play your own game. Never take on more risks than you can handle…Good businesses, good management, plenty of liquidity, always having a loaded gun; if you play by those principles you will do fine no matter what happens. And you don’t ever know what’s going to happen…I mean, when times are good, it is kind of like Cinderella at the ball. She knew at midnight that everything was going to turn into pumpkins and mice, but it was just so much damn fun, dancing there, the guys looked better and the drinks got more frequent and there were no clocks on the wall. And that’s what happened with capitalism. We have a lot of fun as the bubble blows up, and we all think we are going to get out five minutes before midnight, but there are no clocks on the wall.” —Warren Buffett’s answer to “What are the key lessons you took from the financial crisis?”
“Onlookers frequently confuse edge with style…Edge means generating excess returns because of mispricing. Style suggests being in the right place at the right time. Sometimes edge and style overlap, sometimes they don’t.” – Michael Mauboussin[42]
“Edge also implies what Ben Graham….called a margin of safety. You have a margin of safety when you buy an asset at a price that is substantially less than its value. As Graham noted, the margin of safety ‘is available for absorbing the effect of miscalculations or worse than average luck.’ …Graham expands, “The margin of safety is always dependent on the price paid. It will be large at one price, small at some higher price, nonexistent at some still higher price.’” – Mauboussin[43]
“At the core of an analytical edge is an ability to systematically distinguish between fundamentals and expectations. Fundamentals are a well thought out distribution of outcomes, and expectations are what’s priced into an asset. A power metaphor is the [pari-mutuel] racetrack. The fundamentals are how fast a given horse will run and the expectations are the odds on the tote board. As any serious handicapper knows, you make money only by finding a mispricing between the performance of the horse and the odds. There are no ‘good’ or ‘bad’ horses, just correctly or incorrectly priced ones.” – Michael Mauboussin[44]
“The low-risk, high-uncertainty situation gives us our most sought after coin-toss odds. Heads, I win; tails, I don’t lose much!” – Mohnish Pabrai
“There are no bad days in the market. When the market is down, you’ve got bargains, and it’s lovely to think of what you are buying at low prices. When the market is up, the bargains have gone, but you’re rich.” – Bruce Greenwald
“Warren Buffett has said many times that people either get value investing in five minutes or they won’t get it in five years. So, there is something in the human brain, that for some of us, makes all the difference in the world right away and the patience it requires is part of the wiring process.” – Mohnish Pabrai
“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” – Friedrich Hayek
To thrive as a value investor you have to “risk being called a dummy from time to time.” – Christopher H. Browne
“People are, by and large, quite poor at judging correct absolute values but are astute about determining relative values. Psychologists call this coherent arbitrariness, which suggests that individuals are coherent when they compare prices on a relative basis but arbitrary when those prices are considered versus fundamental value.” – Michael Mauboussin[45]
When the price of an asset rises, demand generally falls (and vice versa). When the price of a financial asset rises, however, demand generally rises (and vice versa). – Anonymous
Nothing so induces a change in attitude as seeing a friend or neighbor get rich. – Anonymous
“Value stocks are about as exciting as watching grass grow. But have you ever noticed how much your grass grows in a week?” – Christopher H. Browne
“A man with conviction is a hard man to change. Tell him you disagree and he turns away. Show him facts or figures and he questions your sources. Appeal to logic and he fails to see your point.” – Leon Festinger
Investors need cash and courage, and “courage is a function of process.” – Seth Klarman
“Investment management is a ‘grunt work’ business. Were you to visit our offices, you would be reminded more of the reading room in a college library than some frenetic trading room.” – Christopher H. Browne[46]
“Nothing tells in the long run like good judgment, and no sound judgment can remain with the man whose mind is disturbed by the mercurial changes of the Stock Exchange. It places him under an influence akin to intoxication. What is not, he sees, and what he sees, is not. He cannot judge of relative values or get the true perspective of things. The molehill seems to him a mountain and the mountain a molehill, and he jumps at conclusions which he should arrive at by reason. His mind is upon the stock quotations and not upon the points that require calm thought. Speculation is a parasite feeding upon values, creating none.” – Andrew Carnegie
“The trick in life is not to die. The trick in investing is not to lose.” – Bruce Berkowitz
“We will continue to ignore political and economic forecasts, which are an expensive distraction for many investors and businessmen. Thirty years ago, no one could have foreseen the huge expansion of the Vietnam War, wage and price controls, two oil shocks, the resignation of a president, the dissolution of the Soviet Union, a one-day drop in the Dow of 508 points, or treasury bill yields fluctuating between 2.8% and 17.4%. But, surprise – none of these blockbuster events made the slightest dent in Ben Graham’s investment principles. Nor did they render unsound the negotiated purchases of fine businesses at sensible prices. Imagine the cost to us, then, if we had let a fear of unknowns cause us to defer or alter the deployment of capital. Indeed, we have usually made our best purchases when apprehensions about some macro event were at a peak. Fear is the foe of the faddist, but the friend of the fundamentalist.” – Warren E. Buffett, 1994BerkshireHathaway Shareholder