As a value investor, what you are interested in is whether the company is creating wealth.
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While the Stock Exchange list exhibits the widest diversity, in both directions, between market prices and book values, the underlying explanation is simple enough. In general, prosperous enterprises sell for more than their assets, and unsuccessful ones sell for less.
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My clients say the way to get rich is to buy what I’m buying — but to wait two years to do it.
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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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Difficult decisions require intellectual honesty, being able to see things as they are, not as you want them to be, and then facing up to problems and doing something about them.
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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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Having a mutual fund management company is like having a toll booth on the George Washington bridge all for yourself.
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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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The fact that a stock is considered to be growth stock is no assurance against a decline in income or market value during the downtrend of a business cycle, as growth stocks often depreciate as much as other groups.
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Sometimes a company which has a relatively low profit margin is able greatly to increase its sales volume without increasing its capital investment and thereby increase its earnings per share.
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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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Institutional investing, as it is structured today, simply makes it more difficult to make a high-conviction, long-term decision than to make a low-conviction, short-term decision. The rewards of short-term results substantially superior to the market, and the penalties of short-term results well below the market, are awesome.
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Over the very long run, it is the economics of investing — enterprise — that has determined total return; the evanescent emotions of investing — speculation — so important over the short run, have ultimately proven to be virtually meaningless.
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Paradigm shifts are an inevitable result of forecast errors — the raw material from which paradigm shifts are fashioned.
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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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It is not the low multiple by itself that provides unusual opportunity nor the high evaluations that carry excessive risk. It is, rather, that the level of investment anticipations is low on one side and high on the other.
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Like the basic laws of physics, where action creates reaction, economic and political trends tend to develop their own countervailing pressures.
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As history has taught us, most of the time, most of the crowd moves long after the optimum time to have moved is passed. So it is with investment trends, which start with the belief of a few and end with the conviction of the many.
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Extrapolating existing conditions too far into the future is likely to lead to disappointment. But as long as people continue to make this mistake, and as long as the market consensus reflects it, history will continue to repeat itself in Wall Street.
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Trends are not endless. In fact, the greater the consensus belief in the persistence of a trend, the less likely it is to persist.
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The important question for the investor is not whether conditions are good or bad (if, in fact, they can be measured on such a scale), but whether they are changing for the better or for the worse relative to expectations.
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The important question is not whether conditions are good or bad, but whether they are changing for better or worse.
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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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