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March 27 - April 1, 2023
“The availability of a quotation for your business interest (stock) should always be an asset to be utilized if desired. If it gets silly enough in either direction, you take advantage of it.”
Through Buffett’s insights, we learn not to fall victim to the siren songs of these “expert” opinions and churn our portfolios, jumping from guesstimate to guesstimate and allowing what could otherwise be a decent result to be consumed by taxes, commissions, and random chance.
The true investor scarcely ever is forced to sell his shares, and at all other times he is free to disregard the current price quotation.
If a 20% or 30% drop in the market value of your equity holdings (such as BPL) is going to produce emotional or financial distress, you should simply avoid common stock type investments.
“Investment decisions should be made on the basis of the most probable compounding of after-tax net worth with minimum risk.”
When the water (the market) rises, the duck rises; when it falls, back goes the duck. SPCA or no SPCA, I think the duck can only take the credit (or blame) for his own activities.
Graham’s system not only generated healthy returns, but also all but ensured that he would never go broke again.
The blueprint he gave me was simple: Forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices.”
Everyone can benefit from the diversification Workouts offer, but Workouts aren’t something everyone is going to be comfortable doing.
“Everything else being equal, I would much rather let others do the work. However, when an active role is necessary to optimize the employment of capital, you can be sure we will not be standing in the wings.”
For the liquidation plays, Graham advised, as a general rule of thumb, ascribing 100 cents on the dollar to cash, 80 cents on the dollar to receivables, 67 cents on the dollar for inventory (with a wide range depending on the business), and 15 cents on the dollar for fixed assets.
“We are looking for wide margins of profit—if it looks at all close, we pass.”1
As Buffett said in the letters, “we are looking for wide margins of profit—if it looks at all close, we pass.”
Operationally, a business can be improved in only three ways: (1) increase the level of sales; (2) reduce costs as a percent of sales; (3) reduce assets as a percentage of sales. The other factors, (4) increase leverage or (5) lower the tax rate, are the financial drivers of business value. These are the only ways a business can make itself more valuable.
“What is a good idea in the beginning is often a bad idea in the end.”
“More investment sins are probably committed by otherwise quite intelligent people because of ‘tax considerations’ than from any other cause.”1
“I would rather sustain the penalties resulting from over-conservatism than face the consequences of error, perhaps with permanent capital loss, resulting from the adoption of a ‘New Era’ philosophy where trees really do grow to the sky.”
Furthermore, we will not follow the frequently prevalent approach of investing in securities where an attempt to anticipate market action overrides business valuations.
Thus, I am likely to limit myself to things which are reasonably easy, safe, profitable and pleasant.
“We live in an investment world, populated not by those who must be logically persuaded to believe, but by the hopeful, credulous and greedy, grasping for an excuse to believe.”
Graham always said that investing is done best when it’s most businesslike and business is done best when it’s most investment-like.
