Suppose you bought a stock cheap when it was a relatively obscure situation, and then a half-dozen Wall Street firms started cheering for the stock at the same time. I’d get concerned and think about selling. I don’t like bandwagons. I’d rather do my own thing.
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The very top officers of a company ought to have the equivalent of one year’s salary invested in the company. If they can’t demonstrate such faith in their own ability, why should I?
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If the balance sheet figures look right, I come to the next and hardest part — appraising management.
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We don’t invest for income. If you invest soundly for growth, the income follows.
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I’m an optimist, both as a person and an investor. It’s a big mistake to be pessimistic as long as we have a viable civilization which is reasonably well managed.
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If a company has a sound balance sheet with minimal long-term debt, good growth prospects and responsible management, then the stock should be interesting.
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It makes no sense for individual investors to jump in and out of the market. People who trade in that way rarely die rich, whereas the patient investor often does.
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If managers can’t think of anything else to do with their money they should pay dividends. If they have good places to invest it, that’s much better.
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I have a very simple strategy. I buy good companies at attractive prices. Then I sit on them.
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It’s extremely difficult to figure out when to sell anything. So I’d rather have the stock taken away from me in a merger or a buyout. It’s much easier.
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I had a margin call in 1924, and I swore I never would buy on margin again. That’s one of the main reasons I got through the 1930s.
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If some of the most astute people in Wall Street have frequently guessed wrong in trying to profit by stock market movements, it may not be too much to assume that the attempt itself has represented a misconception of the proper function of management.
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Despite the advantages of size, wealth, a good name and a long tradition, a large enterprise will cease to be profitable if the men at the head get hardening of the arteries or atrophy of the brain tissue or if their heirs prove unequal to inherited responsibilities. Momentum alone will not carry a business forward under such circumstances. Some younger and more aggressive group will assume the leadership of the industry.
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The history of business the world over is full of examples of businesses which have grown from modest beginnings to stupendous earning power.
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The novice soon learns that stocks are likely to maintain an upward or downward trend for long periods of time with minor interruptions of the major trend.
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One point movements may be likened to the ripples of the stock market, whose occurrence may be influenced by so great a multitude of factors that it is impossible to forecast them. Ten-point movements may perhaps be compared to waves.
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The general state of business thus does not forecast the course of stock prices except in the apparently paradoxical fashion that great prosperity affords an advantageous time for selling stocks, extreme business depression an opportunity for purchase.
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The fabric of civilization today is woven of millions of threads. No spot in it is so strong that it will not feel some effect from a weakening at any point.
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Just as in the realm of pugilism, a few years of soft living will make a Dempsey easy prey for a Tunney, so a period of prosperity contains the seeds of its own destruction.
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Finance has its anatomy and its physiology. The former is studied through the medium of balance sheets, the latter through income statements.
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Even in the highest grade securities, there is a certain inescapable speculative risk.
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The factors that affect the state of what we call “general business” are innumerable.
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The man in the street associates the acquisition of wealth with rising markets; failures, ruin, depression, panics with falling markets.
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The average trader is naturally a chronic bull. It is human nature to prefer optimism to pessimism.
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In a public service corporation, bad management may curtail profits or produce losses, good management may turn a weak corporation into a strong one.
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Most useful and most dangerous are the stock market averages, most useful in revealing the general trend of the market, most dangerous if they mislead the trader into forgetting that, after all, his profits depend on the movements of the individual stocks in which he deals.
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In analyzing stocks, industrials or otherwise, the speculator must constantly bear in mind that no two companies are strictly comparable. He must always be prepared to make due allowance for points of unlikeness.
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Stocks often sell at ridiculously low levels for considerable periods merely because few people know anything about them.
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To lose money is the conventional penalty for bad judgment in speculation.
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The obvious fact about security prices to any student of the market is that they fluctuate.
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The official who keeps one eye on his business and one on the stock market is not likely long to be numbered among the leaders.
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It is usually a much simpler matter to forecast a bull market than to call the turn at its end.
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Bull markets and bear markets last long enough so that the average trader is likely to forget by the time the climax is approaching that any sort of movement is possible.
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It takes a great deal of nerve to cling to a short position in a stock in the face of an advancing market even though the stock may clearly be overvalued.
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To consider stocks by groups rather than by individual companies is further to ignore the vital factor of management.
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