With every company I own there is always the question of sustainability, that a transformation in its industry will leave it behind.
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By owning great companies, you can just forget about all the noise and the irrational market fluctuations. And slowly get rich.
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I don’t even worry about the overall market. I worry about the business and the market will take care of itself.
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Failure to be honest with yourself is a problem in any business, but it is especially disastrous in an entrepreneurial company, where the risk-reward stakes are so high.
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For us the principal test is creditworthiness, don’t buy common stocks of companies that need continuous access to capital markets.
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Detecting with a high degree of accuracy when the long-term earnings growth of a company has ceased is difficult because no mathematical formula can be applied to determine when the change from growth to maturity or decadence occurs.
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I think you should try and make your money in this world by selling other people things that are good for them. If you’re selling them gambling services where you rake profits off of the top, like many of these new brokers who specialize in luring the gamblers in, I think it’s a dirty way to make money and I think that we’re crazy to allow it.
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Generally speaking, bad news tends to develop on the installment plan, and the first earnings revision is usually not the last.
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I think that accounting is a very serious issue in a lot of companies. The need to make profits every quarter and to meet analysts’ estimates can be a debilitating force.
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My attitude towards business school is that there are six courses which are critical and most of those are accounting.
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In any negotiation I believe in leaving a little bit on the table. And in any relationship I believe in sharing the stakes.
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The very important basic premise of what really is a fair deal is a deal where everybody makes money, both the sponsor and the stockholder. That is what it is all about.
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The more a business serves others, and the more problems they solve, the more profitable they will be and the more an investor in those enterprises should make.
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The worst business in the world is the one that doesn’t earn good returns on capital but still needs gobs of it going forward.
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For me, business is not a battle to be waged — it’s a puzzle to be solved.
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Historically, many companies that have had terrible times have come back, or many of them do. A decline doesn’t mean it’s the end.
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Good ideas and good products are a dime a dozen. Good execution and good management — in a word, good people — are rare.
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Many business success stories are due at least in part to simple good luck.
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The biggest problem in starting high-tech businesses is the shortage of superior managers. There is too much money chasing too few good managers.
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You have to really understand the businesses that you’re buying through the medium of stocks. And unless you’re willing to put a lot into that, you shouldn’t expect to get much out of it.
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Over the long-term, big companies of America behave more like biology than they do anything else. In biology, all the individuals die and so do all the species. It’s just a question of time. And that’s pretty well what happens in the economy too.
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Investors should seek a company that can lower the cost of production and develop an expanding market without materially reducing the return on capital invested in the business.
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While the trend in profit margins is one of the most important factors to consider, it is not always the company which reports the higher profit margin that proves to be the better growth stock.
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The two best ways of measuring the life cycle of an industry are unit volume of sales and net earnings available for stockholders.
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Earnings of most corporations pass through a life cycle which, like the human cycle, has three important phases — growth, maturity, and decadence.
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Once a business is well established, the greatest opportunity for gain is afforded during the period of growth in earning power. The risk factor increases when maturity is reached and decadence begins.
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One of the things I have learned over the years is how important management is in building or subtracting from value.
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It is easy, of course, to pick out good companies, companies that are better than other companies. But that is not the same thing as picking out good stocks to buy at their current prices.
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I like dealing with someone who is not trying to figure how to get the fixtures in the executive washroom gold-plated.
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We don’t buy and sell stocks based upon what other people think the stock market is going to do (I never have an opinion) but rather upon what we think the company is going to do.
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I have observed many cases of habit patterns in all activities of life, particularly business, continuing (and becoming accentuated as years pass) long after they ceased making sense.
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The single most important decision in evaluating a business is pricing power. If you’ve got the power to raise prices without losing business to a competitor, you’re got a very good business. And if you have to have a prayer session before raising the price by a tenth of a cent, then you’ve got a terrible business.
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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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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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Change creates opportunities to grow, but it also creates opportunities to slip.
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It’s my job to find unusual companies and then judge whether the price they’re selling at is too high.
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If you are in the right companies, the potential rise can be so enormous that everything else is secondary.
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Even a great company can be priced too high if there’s a lot of glamour attached to it.
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I have stressed management, but even so, I haven’t stressed it enough. It is the most important ingredient.
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It’s not what industry you’re in, it’s what you’re doing right that your rivals haven’t yet figured out.
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Buy slowly stocks of companies that will capitalize on the problems of scarcity and social need. Companies with excellent management.
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I think it is more conservative in the long run to be in a company that is really progressing and really has an edge.
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I am vitally interested in companies that are going to survive, but I don’t think a big cap company is necessarily one that will.
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I want companies that welcome dissent, rather than stifle it, that don’t penalize people who criticize what management is doing.
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My business is to find unusual companies and judge whether the price is too high.
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The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors.
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To some degree, I’m betting on the continuation of what is now. I’m not betting it will continue exactly, but I’m betting against dramatic discontinuities.
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We don’t go into companies with the thought of effecting a lot of change. That doesn’t work any better in investments than it does in marriages.
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The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage.
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I am a better investor because I am a businessman, and a better businessman because I am an investor.
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When a manager with a reputation for brilliance tackles a business with a reputation for bad economics, the reputation of the business remains intact.
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You’re not buying a stock, you’re buying part ownership in a business. You will do well if the business does well. And if you didn’t pay a totally silly price.
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In business, you don’t have to do extraordinary things to get extraordinary results. You have to have a sound approach, but you don’t have to be brilliant.
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When you find a really good business run by first-class people, chances are a price that looks high isn’t high. The combination is rare enough, it’s worth a pretty good price.
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If you just buy businesses that your idiot nephew can run, you’re going to do all right.
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The best kind of business to be in is something where you sell something that costs a penny and sells for a dollar and is habit forming.
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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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If it’s a choice between investing in a good company in a great industry, or a great company in a lousy industry, I’ll take the great company in the lousy industry any day. Good management, a strong balance sheet, and a sensible plan of action will overcome many obstacles, but when you’ve got weak management, a weak balance sheet, and a misguided plan of action, the greatest industry in the world won’t bail you out.
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Investing is buying a fractional interest in a business and buying debt claims on a business.
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If you don’t understand a company, if you can’t explain it to a 10-year-old in 2 minutes or less, don’t own it.
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I don’t think people understand there’s 100% correlation with what happens to a company’s earnings over several years and what happens to the stock.
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Spinoffs have a terrific, terrific record in my lifetime. When companies get spun off, something seems to happen to them. They get better run, even though they were well run before.
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The best companies often thrive even as their competitors struggle to survive.
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When there’s a war going on, don’t buy the companies that are doing the fighting; buy the companies that sell the bullets.
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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 harsh truth is that yesterday’s reinvention doesn’t mean as much as today’s execution and tomorrow’s competition. Just as old companies sometimes have to learn new tricks, new companies have to keep changing.
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If you don’t believe corporate profits will continue to rise, and you can’t stomach a decline in the market, don’t buy stocks or equity mutual funds.
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This is the way the capitalist ecology works. Industries decline, old companies wither away, and young companies rise up to replace them. This process is hard on many, but ultimately, it is healthy.
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Ultimately, to be an investor in stocks, you have to believe that American business has a decent future, as well as business worldwide, and that corporations will continue to increase their profits.
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As corporate profits increase, corporations become more valuable, and sooner or later, their shares will sell for a higher price.
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What makes stocks valuable in the long run isn’t “the market.” It’s the profitability of the shares in the companies you own.
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It’s worth reminding ourselves from time to time that gyrations in a stock price may tell us absolutely nothing about the prospects of the company involved.
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It’s in the nature of Wall Street to imagine that whenever a company sets a record for earnings, it will go on setting new ones.
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With every company, there is something to worry about, but the question is, which worries are valid and which are not?
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A lot of great companies have made a lot of decisions you haven’t heard about because they decided not to do something. Some of the best decisions they did do was to not do something.
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The companies that do well, look out five, six, seven years, and some decisions they make may not be the right thing for the next year.
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Behind all the smoke and noise on the market’s surface, it’s important to remember that companies — small, medium, and large — make up the market’s backbone. And corporate earnings drive stock prices.
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The factors that affect the state of what we call “general business” are innumerable.
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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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We’ve seen what happens to companies whose chief executive gets the best press. They are often the ones who end up with the least profits.
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We tried to buy good companies to start with. We don’t think there are supermen who can renovate them and transform them into wonderful, highly profitable enterprises. We can’t do it, and history shows that nobody else can do it, either.
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I do not define my job in any rigid terms but in terms of having the freedom to do what seems to me to be in the best interests of the company at any time.
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Our attitude toward cash generation and asset management came out of our own thought process. It is not copied. After we acquired a number of businesses we reflected on aspects of business. Our own conclusion was that the key was cash flow.
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A common stock investor is one who regards his common stock holdings as a proprietary interest in various businesses, not as a series of quotations in a newspaper.
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Probably the largest aggregate losses are suffered by people who invest overenthusiastically in a basically sound company.
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The higher the quality of a company the more inescapable is the speculative component in its price, and the more subject it is to wide price variations.
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It is interesting to see how unpopular companies can become, merely because their immediate prospects are clouded in the speculative mind.
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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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I didn’t spend any time predicting the economy, or the stock market. I spent all my time looking at companies.
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Stocks are not lottery tickets. There’s a company behind every stock. If the company does well, the stock does well. It’s not that complicated.
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Averaged out, betting on the quality of a business is better than betting on the quality of management. In other words, if you have to choose one, bet on the business momentum, not the brilliance of the manager.
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The stock market registers the judgments of multitudes of buyers and sellers about the many factors which affect business — what business is like today; what it will be like in the future.
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I want a company that’s simple. They don’t have to make seven brilliant decisions every six months to keep going.
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