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October 27, 2018 - February 27, 2022
It truly does pay to advertise, as long as you have something worthwhile to offer.
(The bigger they are, the softer they fall.)
We are just the opposite of those who hurry to sell and book profits when companies perform well but who tenaciously hang on to businesses that disappoint. Peter Lynch aptly likens such behavior to cutting the flowers and watering the weeds.
“Too much of a good thing can be wonderful.”
about prospects for long-term stability in the purchasing power of money. And that kind of stability isn’t in the cards: Both society and elected officials simply have too many higher-ranking priorities that conflict with purchasing-power stability.
hope that we run into some other large stigmatized issue, whose troubles have caused it to be significantly misappraised by the market.
One pleasant reason is that our cash holdings are down—because our position in equities that we expect to hold for a very long time is substantially up.
“If something can’t go on forever, it will end.”
With perfect foresight, this number can be calculated by taking all future cash flows of a business—in and out—and discounting them at prevailing interest rates.
That would be akin to marrying for money—a mistake under most circumstances, insanity if one is already rich.
(2) we simply don’t care what earnings we report quarterly, or even annually,
We are willing to look foolish as long as we don’t feel we have acted foolishly.
(As Wall Streeter Ray DeVoe says: “Fools rush in where angels fear to trade.”)
But as happens in Wall Street all too often, what the wise do in the beginning, fools do in the end.
conservatively-estimated free cash flow—that is, operating earnings plus depreciation and amortization less normalized capital expenditures
Debt now became something to be refinanced rather than repaid.
To induce lenders to finance even sillier transactions, they introduced an abomination, EBDIT—Earnings Before Depreciation, Interest and Taxes—as the test of a company’s ability to pay interest.
And, as Jesse Unruh might have put it, transactions are the mother’s milk of finance.
The man claiming to be a financial alchemist may become rich. But gullible investors rather than business achievements will usually be the source of his wealth.
Promoters, after all, have throughout time exercised the same judgment and restraint in accepting money that alcoholics have exercised in accepting liquor.
If you buy a stock at a sufficiently low price, there will usually be some hiccup in the fortunes of the business that gives you a chance to unload at a decent profit, even though the long-term performance of the business may be terrible. I call this the “cigar butt” approach to investing.
Time is the friend of the wonderful business, the enemy of the mediocre.
It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
Charlie 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 concentrated on identifying one-foot hurdles that we could step over rather than because we acquired any ability to clear seven-footers.
The finding may seem unfair, but in both business and investments it is usually far more profitable to simply stick with the easy and obvious than it is to resolve the difficult.
overwhelming importance in business of an unseen force that we might call “the institutional imperative.”
We’ve never succeeded in making a good deal with a bad person.
A small chance of distress or disgrace cannot, in our view, be offset by a large chance of extra returns.
Charlie and I have never been in a big hurry: We enjoy the process far more than the proceeds—
We hope in another 25 years to report on the mistakes of the first 50. If we are around in 2015 to do that, you can count on this section occupying many more pages than it does here.
“Please include me out.”
Naming the plane has not been easy.
If, however, you buy at a premium and sell at a smaller premium, your results will be somewhat inferior to those achieved by the company.
Profits may be off but our pride in the product remains.
Cutting product quality is not a proper response to adversity.
The most important thing to do when you find yourself in a hole is to stop digging.
(Charlie and I always have preferred a lumpy 15% return to a smooth 12%.)
there is no statute of limitations on stupidity.
each pair is stronger than the sum of its parts because each partner understands, trusts and admires the other.
attack costs as vigorously when profits are at record levels as when they are under pressure.
Finally, the market’s major fear of the moment is that West Coast real estate values will tumble because of overbuilding and deliver huge losses to banks that have financed the expansion.
Even though we had bought some shares at the prices prevailing before the fall, we welcomed the decline because it allowed us to pick up many more shares at the new, panic prices.
Investors who expect to be ongoing buyers of investments throughout their lifetimes should adopt a similar attitude toward market fluctuations; instead many illogically become euphoric when stock prices rise and unhappy when they fall. They show no such confusion in their reaction to food prices: Knowing they are forever going to be buyers of food, they welcome falling prices and deplore price increases.
It’s optimism that is the enemy of the rational buyer.
The roads of business are riddled with potholes; a plan that requires dodging them all is a plan for disaster.
(Beware of past-performance “proofs” in finance: If history books were the key to riches, the Forbes 400 would consist of librarians.)
Mountains of junk bonds were sold by those who didn’t care to those who didn’t think—and there was no shortage of either.
(The only time to buy these is on a day with no “y” in it.)
an affliction I should have expected since almost all airline mergers have been followed by operational turmoil.
In a business selling a commodity-type product, it’s impossible to be a lot smarter than your dumbest competitor.
