Dancing in and out of securities (stocks)

"If you feel you can dance in and out of securities (stocks) in a way that defeats the inflation tax, I would like to be your broker, but not your partner"
[Warren Buffett in Warren Buffett Speaks by Janet Lowe]

Never have an opinion on the market

“Charlie and I never have an opinion on the market because it wouldn’t be any good and it might interfere with the opinions we have that are good.”
[Warren Buffett in Berkshire Hathaway's 1994 Annual Meeting]

On Diversification

"The strategy we've adopted precludes our following standard diversification dogma. Many pundits would therefore say the 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."

[Warren Buffett in Berkshire Hathaway's 1993 Annual Report]

The stock market is a no-called-strike game

"The stock market is a no-called-strike game. You don't have to swing at everything--you can wait for your pitch. The problem when you're a money manager is that your fans keep yelling, 'Swing, you bum!'"

[Warren Buffett in Berkshire Hathaway's 1998 Annual Meeting]

We don't get paid for activity

"We don't get paid for activity, just for being right. As to how long we'll wait, we'll wait indefinitely."

[Warren Buffett in Berkshire Hathaway's 1998 Annual Meeting]

If you expect to be a net saver during the next 5 years....

"If you expect to be a net saver during the next 5 years, should you hope for a higher or lower stock market during that period?"Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall."This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices."

[Warren Buffett in Berkshire Hathaway's 1997 Annual Report]

Benjamin Graham's Mr. Market allegory may seem out-of-date

"Ben's Mr. Market allegory may seem out-of-date in today's investment world, in which most professionals and academicians talk of efficient markets, dynamic hedging and betas. Their interest in such matters is understandable, since techniques shrouded in mystery clearly have value to the purveyor of investment advice. After all, what witch doctor has ever achieved fame and fortune by simply advising 'Take two aspirins'? "

[Warren Buffett in Berkshire Hathaway's 1987 Annual Report]

Time is the enemy of a poor business and the friend of a great business

"Time is the enemy of the poor business and the friend of the great business. If you have a business that's earning 20%-25% on equity, time is your friend. But time is your enemy if your money is in a low return business."

[Warren Buffett in Berkshire Hathaway's 1998 Annual Meeting]

Success in investing doesn't correlate with IQ

"Success in investing doesn't correlate with I.Q. once you're above the level of 125. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing."

[Warren Buffett in BusinessWeek Interview June 25 1999]

The most common cause of low prices

"The most common cause of low prices is pessimism - some times pervasive, some times 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."

[Warren Buffett in Berkshire Hathaway's 1990 Annual Report]

One must avoid the error of the preening duck that quacks boastfully after a torrential rainstorm

"In a bull market, one must avoid the error of the preening duck that quacks boastfully after a torrential rainstorm, thinking that its paddling skills have caused it to rise in the world. A right-thinking duck would instead compare its position after the downpour to that of the other ducks on the pond."

[Berkshire Hathaway Annual Report 1997]

Warren Buffett mentioning about succession planning in an envelope

"When they open that envelope, the first instruction is to take my pulse again."

[Warren Buffett in Berkshire Hathaway's 2001 Annual Meeting after mentioning that the instructions of his succession are sealed in an envelope at headquarters.]

Staying within circle of competence

"There are all kinds of businesses that Charlie and I don't understand, but that doesn't cause us to stay up at night. It just means we go on to the next one, and that's what the individual investor should do."

[Warren Buffett in Morningstar Interview]

Keep playing

"The important thing is to keep playing, to play against weak opponents and to play for big stakes"

[Warren Buffett talking with students at Gaston Hall in November 2002]

I like to shoot fish in a barrel

"I like to go for cinches. I like to shoot fish in a barrel. But I like to do it after the water has run out."

[Warren Buffett talking with Wharton MBA students in October 2003]

Investor vs Speculator

"If you're an investor, you're looking on what the asset is going to do, if you're a speculator, you're commonly focusing on what the price of the object is going to do, and that's not our game."

[Warren Buffett in Berkshire Hathaway 1998 Annual Meeting]

Making purchases in an overheated market

"Investors making purchases in an overheated market need to recognize that it may often take an extended period for the value of even an outstanding company to catch up with the price they paid."

[Warren Buffett in Berkshire Hathaway 1998 Annual Meeting]

Never count on making a good sale

"Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results."

[Warren Buffett in Berkshire Hathaway's 1974 Annual Report]

About Gold

"[Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head"

[Warren Buffett in Harvard 1998]

Start early

"Someone's sitting in the shade today because someone planted a tree a long time ago."

[Warren Buffett in The Real Warren Buffett : Managing Capital, Leading People (2002) by James O'Loughlin]

Who is swimming naked

"You only find out who is swimming naked when the tide goes out."

[Warren Buffett in Berkshire Hathaway's 2001 Annual Report]

Giving back to the humanity

"If you're in the luckiest 1 per cent of humanity, you owe it to the rest of humanity to think about the other 99 per cent."

[Warren Buffett in "Buffett blasts system that lets him pay less tax than secretary", Times Online, 28 June, 2007]

Size drag performance

"If I was running $1 million today, or $10 million for that matter, I'd be fully invested. Anyone who says that size does not hurt investment performance is selling. The highest rates of return I've ever achieved were in the 1950s. I killed the Dow. You ought to see the numbers. But I was investing peanuts then. It's a huge structural advantage not to have a lot of money. I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that."

[Warren Buffett in "Homespun Wisdom from the 'Oracle of Omaha'", BusinessWeek, 5 July 1999]

Should you leave it all to the children?

"(The perfect amount of money to leave children is) enough money so that they would feel they could do anything, but not so much that they could do nothing."

[Warren Buffett with Richard I. Kirkland Jr., "Should You Leave It All to the Children?", Fortune, 29 September 1986.]

Return decreases as motion increases!

"Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac's talents didn't extend to investing: He lost a bundle in the South Sea Bubble, explaining later, 'I can calculate the movement of the stars, but not the madness of men.' If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decreases as motion increases. "

[Warren Buffett in Berkshire Hathaway's 2005 Annual Report]

Investors' enemies

"Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy when others are fearful."

[Warren Buffett in Berkshire Hathaway's 2004 Annual Report]

Investment vs speculation

"The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities -- that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future -- will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There's a problem, though: They are dancing in a room in which the clocks have no hands. "

[Warren Buffett in Berkshire Hathaway's 2000 Annual Report

Deciding based on guesses or emotions

"If we start deciding, based on guesses or emotions, whether we will or won’t participate in a business where we should have some long run edge, we’re in trouble. We will not sell our interested in businesses (stocks) where they are attractively priced just because some astrologer thinks the quotations may go lower even though such forecasts are obviously going to be right some of the time. Similarly, we will not buy fully priced securities because “experts” think prices are going higher. Who would think of buying or selling a private business because of someone’s guess on the stock market? 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. Its availability should never be turned into a liability whereby its periodic aberrations in turn formulate your judgments. A marvelous articulation of this idea is contained in chapter two (The Investor and Stock Market Fluctuations) of Benjamin Graham’s “The Intelligent Investor”. In my opinion, this chapter has more investment importance than anything else that has been written."

[Warren Buffett in Buffett Partnership Letters to his partners in July 12,1966]

View on precious metals and precious stones

"We don't view precious metals and precious stones as great inflation hedges. But we don't bring anything to that game, so we don't play it."

[Warren Buffett in Berkshire Hathaway's Annual Meeting in 1988]

The most important quality for an investor

"The most important quality for an investor is temperament, not intellect. You don't need tons of IQ in this business. You don't have to be able to play three-dimensional chess or duplicate bridge. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd. You know you're right, not because of the position of others, but because your facts and your reasoning are right."

[Warren Buffett in Adam's Smith's Money World show, June 20, 1988]

Warren Buffett try to price, rather than time, purchases

"We try to price, rather than time, purchases. In our view, it is folly to forego buying shares in an outstanding business whose long-term future is predictable, because of short-term worries about an economy or a stock market that we know to be unpredictable. Why scrap an informed decision because of an uninformed guess?"

[Warren Buffett in Berkshire Hathaway's 1994 Annual Report]

People take their cues from price action rather than from values

"For some reason, people take their cues from price action rather than from values. What doesn't work is when you start doing things that you don't understand or because they worked last week for somebody else. The dumbest reason in the world to buy a stock is because it's going up."

[Warren Buffett]

Market downturn

“A market downturn, doesn't bother us. For us and our long term investors, it is an opportunity to increase our ownership of great companies with great management at good prices. Only for short term investors and market timers is a correction not an opportunity."

[Warren Buffett]

Berkshire's goal to attract owners

"Our goal is to attract long-term owners who, at the time of purchase, have no timetable or price target for sale but plan instead to stay with us indefinitely."

[Berkshire Hathaway's 1988 Annual Report]

What does the market serve as

"The market is there only as a reference point to see if anybody is offering to do anything foolish. When we invest in stocks, we invest in businesses. You simply have to behave according to what is rational rather than according to what is fashionable."

[Warren Buffett in Fortune, January 4, 1988]

Keeping an internal scoreboard

"I keep an internal scoreboard. If I do something that others don't like but I feel good about, I'm happy. If others praise something I've done, but I'm not satisfied, I feel unhappy."

[Warren Buffett in US West, Autumn, 1987]

What does Warren Buffett do?

"I'm an analyst basically. I try to figure out what businesses are worth, then divide by the number of shares outstanding."

[Warren Buffett in Omaha World-Herald, October 18, 1987, quoting Money magazine]

Coming out of a computer

"It looks... impressive if it comes out of a computer. But it's frequently nonsense. The person who's making the decision is far more important."

[Warren Buffett in Outstanding Investor Digest, October 7, 1987]

I can't be involved in 50 or 75 things.

"I like the fact it's a big transaction. I can't be involved in 50 or 75 things. That's a Noah's Ark way of investing - you end up with a zoo that way. I like to put meaningful amounts of money in a few things."

[Warren Buffett in Wall Street Journal, September 30, 1987, shortly after Berkshire's $700 million investment in Salomon]

Buy to keep

"We like to buy businesses, but we don't like to sell them."

[Warren Buffett in Berkshire Hathaway's 1987 Annual Meeting]

I do what i like to do!

"I do what i like to do. I don't spend five minutes a year doing what I don't like. And fortunately I have the luxury to do so. I don't care what anyone else does. I like people, and I like the people I associate with. I care about them and their businesses. And besides, I want to have fun!"

[Warren Buffett in Anagnos thesis, 1986]

Buy for life

"You don't trade in houses, children and wives every year, so why trade companies around? I want to have fun with the companies, see them grow and develop. I want to have fun with the companies, see them grow and develop. And also, I want to enjoy life. I can't understand the Carl Icahn's, Victor Posner's and Ted Turner's of the world. In the end all my money is going to charity. So it's crazy to live by being in uncomfortable situations, or being unpleasant towards others. What's the difference anyway, if the Buffett Foundation is worth X or 2X at the end?"

[Warren Buffett in Anagnos thesis, 1986]

Business school

"Business school rewards complex behavior more than simple behavior; but simple behavior is more effective."

[Warren Buffett talks to Patricia Bauer, 1986 appear in Channel magazine]

What money does

"Money, to some extent, sometimes let you be in more interesting environments. But it can't change how many people love you or how healthy you are."

[Warren Buffett talks to Patricia Bauer, 1986 appear in Channel magazine]

Fact that people will be full of emotions

"The fact that people will be full of greed, fear and folly is predictable. The sequence is not predictable."

[Warren Buffett talks to Patricia Bauer, 1986 appear in Channel magazine]

Trend toward value investing

"I've seen no trend toward value investing in the 35 years I've practiced it. There seems to be some perverse human characteristics that likes to make easy things difficult."

[Warren Buffett talk to Columbia Business School in 1985]

New ideas

"The difficulty lies not in the new ideas but in escaping from the old ones."

[Warren Buffett quoting John Maynard Keynes in Berkshire Hathaway's 1983 Annual Report]

The market like the Lord

"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."

[Berkshire Hathaway's 1982 Annual Report]

What Warren Buffett tthinks about futures contracts

"We do not need more people gambling in non-essential instruments identified with the stock market in this country, nor brokers who encourage them to do so. What we need are investors and advisers who look at the long-term prospects for an enterprise and invest accordingly. We need intelligent commitment of investment capital, not leveraged market wagers. The propensity to operate in the intelligent, pro-social sector of capital markets is deterred, not enhanced, by an active and exciting casino operating in somewhat the same arena, utilizing somewhat similar language and serviced by the same work force."

[From letter Warren Buffett to John Dingell, Chairman of the House Subcommittee on Oversight and Investigations, in March, 1982, when Congress was considering whether to allow the Chicago Mercantile Exchange to trade futures contracts.]

Wait and see first?

"(The) argument is made that there are just too many question marks about the near-term future; wouldn't it be better to wait until things clear up a bit? You know the prose: 'Maintain buying reserves until current uncertainties are resolved," etc.

Before reaching for that crutch, face up to two unpleasant facts: the future is never clear; you pay a very high price in the stock market for a cheery consensus. Uncertainty is actually the friend of the buyer of long-term values."

[Warren Buffett in Forbes, August 6, 1979]

Permanent

Rick Berkshire, son of Robert Berkshire, asked if there were any plans to change Berkshire's name. "You don't have to worry about us changing anything at Berkshire,"

[Warren Buffett on Berkshire Hathaway's 1993 Annual Meeting]

Increased capital base will act as an anchor

"An increased capital base will act as an anchor on our relative performance - seems incontestable. The only open question is whether we can drag the anchor along at some tolerable, though slowed, pace. "

[Berkshire Hathaway's 1992 Annual Report]

Value of forecasters

"We've long felt that the only value of forecasters is to make fortune-tellers look good."

[Berkshire Hathaway's 1992 Annual Report]

Tighter Accounting

Managers thinking about accounting issues should never forget one of Abraham Lincoln's favorite riddles: "How many legs does a dog have if you call his tail a leg?" The answer: "Four, because
calling a tail a leg does not make it a leg."

[Berkshire Hathaway's 1992 Annual Report]

Acquisitions as frog-kissing

"In the past, I've observed that many acquisition-hungry managers were apparently mesmerized by their childhood reading of the story about the frog-kissing princess. Remembering her success, they pay dearly for the right to kiss corporate toads, expecting wondrous transfigurations. Initially, disappointing results only deepen their desire to round up new toads.
("Fanaticism," said Santyana, "consists of redoubling your effort when you've forgotten your aim.") Ultimately, even the most optimistic manager must face reality. Standing knee-deep in
unresponsive toads, he then announces an enormous "restructuring" charge. In this corporate equivalent of a Head Start program, the CEO receives the education but the stockholders pay the tuition.

In my early days as a manager I, too, dated a few toads. They were cheap dates - I've never been much of a sport - but my results matched those of acquirers who courted higher-priced
toads. I kissed and they croaked. After several failures of this type, I finally remembered
some useful advice I once got from a golf pro (who, like all pros who have had anything to do with my game, wishes to remain anonymous). Said the pro: "Practice doesn't make perfect; practice makes permanent." And thereafter I revised my strategy and tried to buy good businesses at fair prices rather than fair businesses at good prices."

[Berkshire Hathaway's 1992 Annual Report]

On longevity

"We take as our hero Methuselah." [Noah's ancestor is said to have lived 969 years.]

(Berkshire Hathaway Annual Meeting in 1992)

Trade actively

"We believe that according the name 'investor' to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a romantic."

(Berkshire Hathaway 1991 Annual Report)

Knowing our limitations

Of preparation for the celebrity tennis match (February 9, 1992) in which Buffett teamed with Martina Navratilova to play Pam Shriver and former Dallas Cowboys quarterback Danny White: "I think that the majority of my training for this event is to learn how to say 'yours' in Czechoslovakian."

(Omaha World-Herald, January 21, 1992)

How Tax affects Business Value

"If you can eliminate the government as a 46% partner, the business will be far more valuable"

Wall Street's Advice

"Wall Street is the only place that people ride in a Rolls-Royce to get advice from those who take the subway."

(Los Angeles Times Magazine, April 7, 1991)

Past data

His observation that if you could simply extrapolate the past into the future, "the richest people all would be librarians."

On quotational loss

In the midst of the 1990 stock market slump after Berkshire had fallen 36% from $8,675 to $5,500 and Fortune magazine estimated that Buffett had a paper loss so far for the year of $1.5 billion or $215,450 an hour: "I have not cut back from double hamburgers to a single hamburgers."

(Fortune, November 5, 1990)

About Making Money

"I enjoy the process far more than the proceeds, though I have learned to live with those, also."

(Forbes, October 22, 1990)

On Value Investing

Value Investing: "The fact that it's so simple makes people reluctant to teach it. If you've gone and gotten a Ph.D. and spent years learning how to do all kinds of tough things mathematically, to have to come back to this is - it's like studying for the priesthood and finding out that the Ten Commandments were all you needed."

(New York Times Magazine, L. J. Davis, April, 1990)

Macroeconomic predictions

"Bershire has not thrived in the past from making macroeconomic predictions. Therefore, we don't think a lot about it. We just try to do sound things and we figure economic trends will average out over the long run. We're agnostics on the economy."

(Charlie Munger in Berkshire Hathaway Annual Meeting 1990)

Buying mediocre companies at bargain price

"After ending our corporate marriage to Hochschild Kohn, [a Baltimore department store Buffett bought for a bargain price] I had memories like those of the husband in a country song, "My Wife Ran Away With My Best Friend and I Still Miss Him a Lot."

(Berkshire Hathaway Annual Report 1989)

Opinion about Stock Market, Interest Rates or Business Activity

"We do not have, never have had, and never will have an opinion about where the stock market, interest rates or business activity will be a year from now."

(Forbes, October 13, 1997 from 1987 quote)

Teaching a young dog old trick

On the advanced age of many Berkshire managers: "We find it's hard to teach a young dog old tricks. But we haven't had lots of problems with people who hit the ball out of the park year after year. Even though they're rich, they love what they do. And nothing ever happens to our managers. We offer them immortality."

(Berkshire Hathaway Annual Meeting in 1987)

Buy to own, not to sell.

"You may quit having children if you keep having clunkers. But you just don't cast them out."

(Berkshire Hathaway Annual Meeting in 1986)

Establishing criteria for acquisition

Establishing criteria for acquisition of companies is "a lot like selecting a wife. You can thoughtfully establish certain qualities you'd like her to have, and then all of a sudden, you meet someone and you do it."

(Berkshire Hathaway's Annual Meeting in 1986)

Acquisitions

"The hunt for acquisitions is like "bagging rare and fast-moving elephants."

Reasonable Creature

"So convenient a thing it is to be a reasonable creature, since it enables one to find or make a reason for everything one has a mind to do."

(Warren Buffett quoting Ben Franklin)

Stay quietly in one room

"All men's misfortunes spring from the single cause that they are unable to stay quietly in one room."

(Buffett quoting Pascal)

When ideas fail

"When ideas fail, words come in handy."

(Warren Buffett quoting Goethe)

Exceptional Gain

"Our gain in net worth during the year was $613.6 million or 48.2%. It is fitting that the visit of Halley's Comet coincided with this percentage gain; neither will be seen again in my lifetime."

(Berkshire Hathaway's 1985 Annual Report)

Investment Disclosure

"I ... prefer the iceberg approach towards investment disclosure."

(Buffett Partnership letter, July 22, 1966)

Testing ... Testing ....

"Testing... Testing.... One Million... Two Million... Three Million. "