An introduction to Warren Buffett is almost not necessary. He is widely viewed as the best investor of all time, having achieved in his early days with small amounts of money an annual return of 50% yearly. Over the course of 50 years with Berkshire Hathaway, a 20% annual return was generated. Many early investors in Berkshire who held for decades are now millionaires and multi-millionaires. Here’s all the immense wisdom on all areas of life, many of them in summarized one liners, that I’ve gathered over 10 years.
-Net tangible assets (book value); assets (less intangible assets) — liabilities. Earning power (or return rate) — 1/P/E ratio (higher the better generally), a 50% margin of safety (Graham recommends 65%). Value stocks tend to achieve better performance than growth stocks in the long run. Price does not equal value. Highly speculative and highly known stocks are speculative — large caps not covered are likely the ones with higher margin of safety. Easy money leads to more competition, which makes it harder to make easy money.
-enterprise value: acquisition value; debt + equity — cash
-total market cap of stocks vs gdp (over 100% is danger)
-buy stock in a business that is so good that even an idiot can run it, because eventually one will
-it’s far better to buy good businesses at fair prices than bad businesses at bargain prices
-A significant percentage of people don’t even want to succeed, they just want others to fail. That is not a good idea to carry around
-a business getting bad results with a good manager is bad, or getting in to things too late
-recognize bad decisions right away and do not wait and leave immediately if the short and long term is bad
-we can lose a lot of money, but we can’t lose any reputation. Let people do things the way they want to
-he still goes to work at Berkshire as he loves what he does (since it is his own thing)
-leadership: guiding people to a shared vision and executing
-would you do something if it was going to be on the front page of the newspaper tomorrow?
-you want to choose your heroes carefully because you will look like them
-you will encounter disappointments, but the future is what counts
-mistakes are part of the game
-one can control their integrity, that is a big part of one’s identity
-your choices outweigh your abilities
-repeat what works for you
-be around people better than you are as you are who you hang around with
-they have to love the business and the money, otherwise the money will disappear or they will in 6 months or some short term time frame
-hands off approach
-durable competitive advantage; therefore, businesses that are hard to knock off
-greatest success measure: do the people around you love you? Look for people who are loving and lovable, do so by being loving yourself. If you were a Jew in world war 2 and no one would hide you, then no one loves you. If you have people willing to hide you, then you have succeeded.
-Find people who: genuinely love themselves, genuinely loves others, and is genuinely loved by others
-Love is the only thing that money cannot buy, you can’t force someone to respect you
-being in a job you don’t like is like being in a marriage for money or sex
-I can usually tell in the first two or three minutes if a deal is going to happen or not
-get one good idea a year and ride that idea to it’s potential
-ROIC: (net income — dividends)/(debt+equity)
-you don’t have to make it back the way you lost it; in fact, it’s usually a mistake to try that
-you can’t make a good deal with a bad person. Deal with people who you like, trust, admire, respect.
-Anything that can’t go on forever will end.
-If I could bet on someone and get 10% of their future profits (not already successful) who would that be and why (what qualities)? If I could short someone on them failing, who would that be and what qualities?
-Look for someone who has low expectations
-You have to marry the best person you can get. Things have gotten so difficult in life you have to get by in life with the best advantage we can get
-you don’t get many opportunities in life. When you get them, and the odds are in your favour, swing and swing big. A little swing is not sufficient. Think of the 20 hole punchcard, where going up to the 20 likely won’t happen. Not even close in fact. You would make way more money with only 20 punches, and probably only use a fraction of the 20 punches. Dabbling is stupid, you are either all in or not at all, none of this middle ground hesitation
-essays of Warren Buffett:
-hire good people, more important than designing hierarchies and clarifying roles
-managers who think like owners are the good managers (focused on creating value rather than predictions, boasting, stock performance)
-Buffett is candid and in the minority of people whom are candid
-volatility is not risk; in fact, it can be an opportunity
-efficient market theory is crap
The chains of habit are often too light to be felt until they are too heavily chained. Making 10x instead of x or even 2x instead of x is not the key to life
“The people we closest associate with is the direction we move, particularly who we choose as a spouse. Associate with people who you would like to be, who are good and better. Choose friends wisely who I admire.” Warren Buffett. He never had an argument but disagreed on things with Charlie Munger
-Look for the job you would take if you didn’t need the job
-when you find a problem, you have to do something about it
-Don’t go overboard on the delayment of gratification like all these old Asians do and then don’t even get the gratification in the end
-when you buy a stock, Buffett reacts better to declining price than increasing (buy near 52 week low and if sells, at 52 week high)
-share buybacks make sense only if the intrinsic value is better than stock price (otherwise, overvalued)
-read the annual report, 10–K
-PEG ratio: (price/eps)/EPS growth, or PE/EPS growth. Per peter Lynch, PEG ratio above 1 is overvalued, below 1 is undervalued (this, PE and earnings growth rate should be approximately equal). If P/E=20 and earnings growth rate is 20%, PEG ratio is 1
-10k, 10q (summary and more short term, unaudited of 10k), and annual report is the most important
-Buffett has never bought an IPO
-as soon as you find a mistake, do something about it
-new industries: artificial food
-show me your role models, and I will show who you are
-emulate good behavior from good people and get rid of bad behavior that I see in bad people
-for those who don’t want to diversify, owning more than 6 stocks doesn’t make sense. The top holding could have nearly half of ones portfolio
-omission is way worse than commission. “Big opportunities in life have to be seized; and, they must be done big, not on a small scale”
-measure of free cash flow is very important as well, if that’s going up, especially for a company like amazon
-focus, optimism, positive feelings, learning, connection, shared thinking, humility, a sense of humour
-do not let fear get in the way of your dreams
-Keynes: invest in two or three businesses to concentrate ability and aptitude
-investing in many stocks and calling oneself an investor is like someone who does one night stands calling himself a romantic
-Twain: Place all your eggs in one basket and closely monitor that basket
-graham: price is what you pay, value is what you get
-“what the wise do in the beginning, fools do in the end”
-being lovable to be loved, doing what you love and with who you love. Love is the only thing money can’t buy. Find someone who is full of love
-being around those that are good bring you up, being around those bad will drag you down
-you don’t have to be smarter than the rest. You have to be more disciplined
-you can’t buy what is popular and do well
-companies with high positive FCF now can use cash and acquire more companies/grow own company; huge advantage
-choose your heroes and those around you wisely
-life and nature are not linear
-don’t follow the crowd, be contrarian
-what’s on your inner scorecard is more important than your outer scorecard
-develop good habits, and avoid bad habits
-develop good qualities, avoid bad qualities
-if you have something negative to say; just forget about it a day, then see if you feel that way a day later
-make sure your blunders are never fatal; and you don’t want to make them on the really big decisions, for example, choosing the person you marry
-be forward looking, not regretting or dwelling mistakes or the past
-things that seem disastrous at the time usually do work out for the best; our worst moments lead to the best things happening
-most people go through life using a very small part of their potential. The ones who function well are not the ones with the biggest motors, but with the most efficient ones
-part of the excitement of the game is finding new ways to win. If you knew you would get all hole-in-ones, that would not be exciting
-life isn’t about who can get to the finish line first
-“While we adhere to a policy of transparency, we will only disclose our marketable securities activities to the extent mandated by law. Valuable investment ideas, like good product or business acquisition concepts, are scarce and can be vulnerable to competitive appropriation”
-Buffett loves people who are candid
-Billy Rose use to say, if you know 100 girls, you don’t know any of them very well. The trick is to know a lot about what you own, and don’t own that many things
-A ratio Buffett likes is price/owners earnings
-avoid dragons rather than slaying them
-It’s wiser to purchase an exceptional business at a reasonable cost than to acquire a mediocre business at a discounted price
-Even with substantial insider information and a million dollars, it’s possible to incur substantial losses within a year
-a truly great business must have an enduring moat; that means, it won’t be a startup and will already have somewhat of a good track record
-you only have to do a few things right if you don’t do too many things wrong
-buy more of good companies, especially current owned if better than new
-simple behavior is more effective than complex, though complex gets rewarded more
-Exhibit caution when others display excessive confidence, and seize opportunities when others succumb to fear
-if you buy things you don’t need, soon you sell things you need
-go where the puck will be, not where it currently is
-does not invest based on macro forecasts
-in investing, pessimism is your friend, euphoria the enemy
-buying when people are upbeat for meaningless reassurance leads to losses
-buy companies with strong pricing power
-Time favors exceptional companies and works against mediocre ones
-invest in businesses that even fools can run as someday one will
-overtrading is the enemy
-cash is the worst investment
-Avoid assigning excessive significance to yearly outcomes; instead, concentrate on four- or five-year averages
-inactivity strikes us as intelligent behavior
-ignore political and economic forecasts
-do things when opportunities come along, and do them well. Don’t try and do too much
-turnarounds seldom turn
-predictions tell you more about the person than what they are predicting, they are useless as no one can predict the future
-businesses sell happiness
-optimistic about the unknown future and about America
-the stock market transfer wealth from the impatient to the patient
-you can’t make a good deal with a bad person
-bubbles usually come up in different forms
-why spend time talking about something you don’t know anything about? People do it all the time, why?
-invest in great companies in temporary trouble
-you only need two things in investing: how to value a business and how to consider market prices
-if principles can become outdated, they are not principles
-we enjoy the process far more than the proceeds
-figure out the approximate value of a business, not the market
-if past history mattered, librarians would win
-when you associate with the people you love and do what you love, it doesn’t get better than that
-you can’t buy what is popular and do well
-rationality is essential to investing
-I’d rather have a 10 million business make 15% than a 100 million business make 5%
-would I be willing to own the entire company and does managements policies tie with mine?
-buy a business, so do not rent stocks
-a business that can make money while no one runs it is a good business
-diversification is a protection against ignorance; it makes very little sense for those that know what they are doing
-heavy bets, infrequent bets, big bets
-if you have a harem of 40 women, you never get to know any of them very well
-Investors who buy in an overinflated market should acknowledge that it might require a significant duration for the value of even an exceptional company to align with the price they paid
-do not buy marginal businesses at cheap prices; marginal companies are the wrong foundation to be upon
-Choosing a life partner for marriage undoubtedly necessitates more stringent criteria than those for casual dating
-Don’t overlook something appealing today under the assumption that you’ll discover something even more attractive tomorrow
-Nothing lulls rational thinking as effectively as substantial amounts of effortless money
-Never risk what you have and need for what you don’t have and don’t need
-Stop your attempts to forecast the market’s direction, the economy, interest rates, or elections
-The most significant investment rewards are reaped by those who, through either fortunate circumstances or astute judgment, discover occasional companies that can consistently achieve growth in sales and profits far exceeding the industry average over the years
-I believe in getting things done through other people
-if you are not happy with the wealth and what you have now, you will never be happy
-Constructing a reputation requires two decades, while it can be tarnished in a mere five minutes. If you think about that, you’ll do things differently
-we don’t get paid for activity, we get paid for being right. We will wait indefinitely for that.
-over the years Charlie and I have observed mass accounting fraud where perpetrators rarely get punished
-I always knew I was going to be rich. I don’t think I ever doubted it for a minute
-big opportunities don’t come frequently, and they must be seized bigly
-“The fundamental query regarding human behavior revolves around whether individuals adhere to an internal scorecard or an external one. It’s advantageous if you can find contentment with an internal scorecard”
-“For every bubble, there is a hidden pin lying in wait. When these two elements eventually collide, a fresh wave of investors is reminded of a timeless lesson”
-honesty is a very expensive gift. Don’t expect it from cheap people
-the most important thing to do if you find yourself in a hole is to stop digging
-6–8 hours per week investments, otherwise index funds are going to be required
-if you can enjoy Saturday’s and Sunday’s without looking at stock prices, try it on weekdays
-We plan to persist in our approach of collaborating solely with individuals we hold in high regard and respect. This strategy not only enhances the likelihood of positive outcomes, but also guarantees us an exceptionally enjoyable experience
-a bull market is just like sex. It feels best just before it ends
-the worst sort of business is one that grows rapidly, required significant capital to engender the growth, then earns little or no money, such as many airlines
-the single most important decision for evaluating a business is pricing power. Do they have unlimited pricing power or does the moment they raise the price cause a loss of sales?
-key to investing: evaluate the business and if it has a durable competitive advantage
-no matter how great the talent or effort, some things just take time
-intensity is the price of excellence
-The distinction between successful person and highly successful ones is that the latter frequently decline nearly every opportunity presented to them
-buy into a company because you want to own it, not because you want the stock to go up
-People will invariably attempt to deter you from pursuing the right course of action, especially if it deviates from conventionality
-do not save what is left after spending, but what is left after saving
-business decay occurs with ABC; arrogance, bureaucracy, and complacency
-the asset I most value, aside from health, is interesting, diverse, and long-standing friends
-the happiest people do not necessarily have the best things, they simply appreciate the things they have.
-do what you love; it’s insane to keep taking jobs because it looks good on your resume.
-in order to not make too many stupid things, its enough to make a few very important things
-never test the depth of the river with both feet
-diversification may preserve wealth, but concentration builds wealth
-money to some extent can let you be in more interesting environments, but it can’t change how many people love you or how healthy you are
-be who you want, don’t care what others think, do what you want, be with those who you like and are better than you, write down and emulate good qualities, write down bad qualities of people you don’t like and don’t emulate those
-you want to have friends that reciprocate your behavior back, ones that you genuinely trust and can grow along with in life
-if you’re smart, you don’t need margin. If you’re dumb, you won’t know how to use margin.
-flouring our what industries will thrive is easy, but which companies in those industries is not. Most companies in any industry lose long term. Figuring out the economics of a business is much harder.
-big opportunities are few in life and must be seized, done well and done big time as we don’t get many
-Anything that can’t go on forever will end
-we get smarter but we don’t get wiser
-Exercise caution when it comes to investment activities that garner applause; the truly significant maneuvers often elicit nothing more than indifference
Disclaimer
This is not Financial Advice. This article is meant only for educational and perhaps entertainment purposes.