Quotes By Warren Buffett

Warren Buffett

• I put heavy weight on certainty. It's not risky to buy securities at a fraction of what they're worth.
• Occasional outbreaks of those two super-contagious diseases, fear and greed, will forever occur in the investment community. The timing of these epidemics is equally unpredictable, both as to duration and degree. Therefore we never try to anticipate the arrival or departure of either. We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.
• With enough inside information and a million dollars you can go broke in a year.
• The first rule is not to lose. The second rule is not to forget the first rule.
• When you combine ignorance with leverage you get some pretty interesting results.
• The market, like the Lord, helps those who help themselves. But, unlike the Lord, the market does not forgive those who know not what they do.
• You could be somewhere where the mail was delayed three weeks and do just fine investing.
• Never ask the barber if you need a haircut.
• You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with the 130 IQ.
• You should invest in a business that even a fool can run, because someday a fool will.
• You go to bed feeling very comfortable just thinking about two and a half billion males with hair growing while you sleep. No one at Gillette has trouble sleeping.
• If you gave me $100 billion and said take away the soft drink leadership of Coca-Cola in the world, I'd give it back to you and say it can't be done.
• Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well.
• For some reason people take their cues from price action rather than from values. Price is what you pay. Value is what you get.
• For society, the internet's a wonderful thing. But for capitalists it's probably a net negative.
• Diversification may preserve wealth, but concentration builds wealth.
• I'd be a bum on the street with a tin cup if the markets were efficient.
• In the short run, the market is a voting machine. In the long run, it's a weighing machine.
• The new issue market is ruled by controlling stockholders and corporations who can usually select the timing of offerings. Understandably these sellers are not going to offer any bargains. It's rare you'll find X being sold for half-X. Indeed, in the case of common-stock offerings, selling shareholders are often motivated to unload only when they feel the market is overpaying.
• As far as I am concerned, the stock market doesn't exist. It is only there as a reference to see if anybody is offering to do anything foolish.
• To be successful, you should concentrate on the world of companies, not arcane accounting mathematics.
• With each investment you make, you should have the courage and the conviction to place at least ten per cent of your net worth in that stock.
• We like to buy businesses. We don't like to sell and we expect the relationship to last a lifetime.
• There's very little money to be made recommending our strategy [buy-and-hold].Your broker would starve to death. Recommending something to be held for 30 years is a level of self-sacrifice you'll rarely see in a monastery, let alone a brokerage house.
• When a chief executive officer is encouraged by his advisors to make deals, he responds much as would a teenager boy who is encouraged by his father to have a normal sex life. It's not a push he needs.
• It's easier to create money than to spend it.
• I wouldn't mind going to jail if I had three cellmates who played bridge.
• I don't try to jump over 7-foot bars. I look around for 1-foot bars that I can step over.
• Money, to some extent, sometimes lets you be in more interesting environments. But it can't change how many people love you or how healthy you are.
• I've often felt there might be more to be gained by studying business failures than business successes.
• It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.
• Chains of habit are too light to be felt until they are too heavy to be broken.
• I wouldn't have been the most popular guy in the class, but I wouldn't have been the most unpopular either. I was just sort of nothing.
• Ben made his customary calculation of value to price and said no.
• If Bill had started a hot dog stand, he would have become the hot dog king of the world. He will win in any game. He would be very good at my business, but I wouldn't at his.
• I'd just bet on him. Nobody has lost money doing that yet.
• Charlie and I can handle a four page memo over the phone with three grunts.
• Ben Graham wasn't about brilliant investments and he wasn't about fads of fashion. He was about sound investing, and I think sound investing can make you very wealthy if you're not in too big of a hurry. And it never makes you poor, which is even better.
• Investing in a market where people believe in efficiency is like playing bridge with someone who has been told it doesn't do any good to look at the cards.
• John Maynard Keynes essentially said, don't try and figure out what the market is doing. Figure out a business you understand, and concentrate.
• If the business does well, the stock eventually follows.
• My idea of a group decision is to look in the mirror.
• When managers want to get across the facts of a business to you, it can be done within the rules of accounting. Unfortunately, when they want to play games, at least in some industries, it can also be done within the rules of accounting. If you can't recognize the differences, you shouldn't be in the equity-picking business.
• Full-time professionals in other fields, let's say dentists, bring a lot to the layman. But in aggregate, people get nothing for their money from professional money managers.
• Draw a circle around the businesses you understand and then eliminate those that fail to qualify on the basis of value, good management and limited exposure to hard times.
• I read annual reports of the company I'm looking at and I read the annual reports of the competitors - that is the main source of material.
• All there is to investing is picking good stocks at good times and staying with them as long as they remain good companies.
• I'd rather have a $10 million business making 15 per cent than a $100 million business making 5 per cent.
• Read Ben Graham and Phil Fisher, read annual reports, but don't do equations with Greek letters in them.
• Whenever I read about some company undertaking a cost-cutting program, I know it's not a company that really knows what costs are about. The really good manager does not wake up in the morning and say 'This is the day I'm going to cut costs,' any more than he wakes up and decides to practice breathing.
• Owning Snow White is like owning an oil field. You pump it out and sell it, and then it seeps back in again.
• When management with a reputation for brilliance tackles a business with a reputation for poor fundamentals, it is the reputation of the business that remains intact.
• Diversification is a protection against ignorance. It makes very little sense for those who know what they're doing.
• My favorite time frame for holding a stock is forever.
• Our prototype for occupational fervour is the Catholic tailor who used his small savings of many years to finance a pilgrimage to the Vatican. When he returned, his parish held a special meeting to get his first-hand account of the Pope. "Tell us," said the eager faithful, "just what sort of fellow is he?" Our hero wasted no words. "He's a forty-four medium."
• A good managerial record (measured by economic returns) is far more a function of what business boat you get into than it is of how effectively you row. 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.
• Many corporate managers deplore governmental allocation of the taxpayer's dollar but embrace enthusiastically their own allocation of the shareholder's dollar [to charities of their own choosing]. We've yet to find a CEO who believes he should personally fund the charities favored by his shareholders. Why, then should they foot the bill for his picks?
• It has become fashionable at public companies to describe almost every compensation plan as aligning the interests of management with those of shareholders. In our book, alignment means being a partner in both directions, not just on the upside. Many 'alignment' plans flunk this basic test, being artful forms of 'heads I win, tails you lose.'
• The professors who taught Efficient Market Theory said that someone throwing darts at the stock tables could select stock portfolio having prospects just as good as one selected by the brightest, most hard-working securities analyst. Observing correctly that the market was frequently efficient, they went on to conclude incorrectly that it was always efficient.
• The strategy we've adopted precludes us from following standard diversification dogma. Many pundits would therefore say our 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.
• We believe that according the name 'investors' to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a romantic.
• Our reaction to a fermenting industry is much like our attitude toward space exploration: we applaud the endeavour but prefer to skip the ride. Obviously many companies in high-tech businesses or embryonic industries will grow much faster than will The Inevitables [like Coca-Cola and Gillette]. But we would rather be certain of a good result than hopeful of a great one.
• Loss of focus is what most worries Charlie [Munger] and me when we contemplate investing in a business that looks outstanding. All too often, we've seen value stagnate in the presence of hubris or boredom that caused the attention span of managers to wander. Would you believe that not a few decades back they were growing shrimp at Coke and exploring for oil at Gillette?
• Your goal as an investor should be to purchase, at a rational price, a part interest in an easily-understandable business whose earnings are virtually certain to be materially higher five, ten and twenty years from now. Over time, you will find only a few companies that meet these standards - so when you see one that qualifies, you should buy a meaningful amount of stock. You must also resist temptation to stray from your guidelines: If you aren't willing to own a stock for ten years, don't even think about owning it for ten minutes.
• It's far better to buy a wonderful company at a fair price, than a fair company at a wonderful price. Now, when buying companies or common stocks, we look for first-class businesses accompanies by first-class managements.
• After 25 years of buying and supervising a great variety of businesses, Charlie [Munger] and I have not learned how to solve difficult business problems. What we have learned is to avoid them. To the extent we have been successful, it is because we have concentrated on identifying one-foot hurdles that we could step over rather than because we acquired any ability to clear seven-footers.
• The most common cause of low prices is pessimism - sometimes pervasive, sometimes 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.
• Stocks can't outperform businesses indefinitely. Indeed, because of the heavy transaction and investment management costs they bear, stockholders as a whole and over the long term must inevitably underperform the companies they own. If American business, in aggregate, earns about 12% on equity annually, investors must end up earning significantly less. Bull markets can obscure mathematical laws, but they cannot repeal them.
• Earnings should only be retained [as opposed to being paid out as dividends] when there is a reasonable prospect that for ever dollar retained by the corporation, at least one dollar of market value will be created for owners. This will happen only if the capital retained produces incremental earnings equal to, or above, those generally available to investors.
• One of the ironies of the stock market is the emphasis on activity. Brokers, using terms such as 'marketability' and 'liquidity', sing the praises of companies with high share turnover. But investors should understand that what is good for the croupier is not good for the customer. A hyperactive stock market is the pickpocket of enterprise.
• In the search for companies to acquire, we adopt the same attitude one might find appropriate in looking for a spouse: it pays to be active, interested, and open-minded, but it does not pay to be in a hurry.
• A company that wants to use its own stock as currency for an acquisition has no problems if the stock is selling in the market at full intrinsic value. But suppose it is selling at only half intrinsic value. In that case it is faced with the unhappy prospect of using a substantially undervalued currency to pay for a fully valued property [the negotiated price of the target company]. In effect the acquirer must give up $2 of value to receive $1 of value. Under such circumstances, a marvellous business purchased at a fair sales price becomes a terrible buy. For gold valued as gold cannot be purchased intelligently through the utilization of gold valued as lead.
• If Fed Chairman Alan Greenspan were to whisper to me what his monetary policy was going to be over the next two years, it wouldn't change one thing I do.
• A pin lies in wait for every bubble and when the two eventually meet, a new wave of investors learns some very old lessons.
• We have embraced the 21st century by entering such cutting-edge industries as brick, carpet, insulation and paint. Try to control your excitement.
• Buy stocks like you buy your groceries, not like you buy your perfume.
• If you are a know-something investor, able to understand business economics and to find five to ten sensibily priced companies that possess important long-term competitive advantages, conventional diversification (broadly based active portfolios) makes no sense to you.
• When the whorehouse burns down, even the pretty girsl have to run out.
• If, after half an hour, you haven't figured out who the patsy is, then you're the patsy.
• I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.
• Either they're trying to con you or they're trying to con themselves.
• In a difficult business, no sooner is one problem solved than another surfaces - never is there just one cockroach in the kitchen.
• I look for businesses in which I think I can predict what they're going to look like in ten to fifteen years time. Take Wrigley's chewing gum. I don't think the internet is going to change how people chew gum.