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]

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]

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]

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]

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)