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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Successful investing requires the management of your own ego and temperament and usually that of your clients as well.
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Faith in the future is as much motivated by confidence as it is a reflection of fear in acknowledging a mistake.
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Taking risks today for tomorrow’s reward is both the most challenging and difficult of tasks. Unbridled optimism must be tempered with reality.
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Internal rates of return and other mathematical formulas for real estate projections attempt to legitimize the presumption of predictable results.
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Investor anticipations, similar to the laws of economics, are shaped at the margin. That is why changes in earnings estimates follow, for the most part, changes in stock prices, and not vice versa as it should be.
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Experience teaches us that earnings estimates, especially those of a longer-term nature, are not particularly reliable.
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Many investors get “nickeled and dimed” into penury by failing to appreciate that the first loss is not only the best, but usually the smallest. They must learn to avoid defensive rationalization of their past bad judgments.
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Most investors underestimate the stress of a high-risk portfolio on the way down.
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Knowledge of the past is indispensable to understanding and managing the future.
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Too many investors fail to follow some simple, time-tested tenets that improve the odds of achieving success and, at the same time, reduce the anxiety naturally associated with an uncertain undertaking.
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As all of us were taught, but most of us have long since forgotten, economic change occurs at the margin, where the action takes place.
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Most investors tend to cling to the course to which they are currently committed, especially at turning points.
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It is more important to know what will happen than when it will happen, because it is impossible to forecast with precision the timing of critical events.
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The thing about buying depressed stocks is that you really have three strings to your bow: 1) earnings will improve and the stocks will go up; 2) someone will come in and buy control of the company; or 3) the company will start buying its own stock and ask for tenders.
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If a stock goes up 30 or 40 times in ten years, it has to have been grossly underpriced to begin with.
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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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Almost every value trap is the result of people extrapolating past returns on capital and past valuations onto a different situation today.
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The more things people worry about the better for an investor, because those worries are already instantiated in the overall market.
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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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