As an investor in businesses, which generate enormous cash flows, my single most important issue to get right is what management will do with cash flow through reinvestment. Do they care about the owner, or do they care about themselves?
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It’s a personal quirk of mine that when the CEO shows up on magazine covers as a celebrity, I’m automatically hesitant to invest in the stock.
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What these companies do is try to put the best spin or face on their situation. Rarely will managements tell you how bad things are.
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Nearly every mistake I’ve made has been because I picked the wrong people, not the wrong idea.
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Ideas are a dime a dozen. It’s the execution that’s really the important thing and you need really good people for that. Good people can change directions, but there are very, very few truly great people who can execute properly.
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When you get to these frenzied markets, it drives managements or portions of managements to hanky-panky.
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We look at the management of corporations that tend to overstate or massage profits as promoters. And that is a kind word.
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A good record doesn’t necessarily prove good management. Outside economic factors such as the business cycle can make any company look good for a while.
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Good management has an extraordinary way of making money for you, and bad management, no matter how favorable the environment, has a way of missing opportunities.
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The market gets obsessed with quarterly results when there are surprises, when management is surprised. And management, as you well know, usually is.
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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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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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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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I think the management should tell it like it is at all times and not be a big promoter of its own stock.
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The kind of executives who have a Buffet-like mindset and never get in trouble are a minority group, not a majority group.
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Neither the corporate executive nor the investment manager can allow himself to be lulled into the belief that any company, regardless of its record of achievement, must necessarily provide satisfactory rates of growth.
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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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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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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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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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Change creates opportunities to grow, but it also creates opportunities to slip.
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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 want companies that welcome dissent, rather than stifle it, that don’t penalize people who criticize what management is doing.
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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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I feel the same way about managing that I do about investing: It’s just not necessary to do extraordinary things to get extraordinary results.
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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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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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Perhaps nothing is more indicative of the quality of a company’s management than its accounting methods.
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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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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 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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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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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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Our accounting is set to maximize cash flow, not reported earnings. Smoothing reported earnings just has to take a backseat.
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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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I like to steer the boat each day rather than plan ahead way into the future.
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I believe in maximum flexibility, so I reserve the right to change my position on any subject when the external environment relating to any topic changes too.
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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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To consider stocks by groups rather than by individual companies is further to ignore the vital factor of management.
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Perhaps the most important rule in management is “Get the incentives right.”
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Modern life creates successful bureaucracy and successful bureaucracy breeds failure and stupidity.
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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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