Pearls of Wisdom by Warren Buffet
His investing style is studied and copied by legions of acolytes from Wall Street to small-town America. His missives in Berkshire Hathaway's annual reports are read (and cited) as if they were the Gospel itself. Lets learn the most important tenets of Buffett's investment philosophy: *The critical investment factor is determining the intrinsic value of a business and paying a fair or bargain price. *Never invest in a business you cannot understand. *Risk can be greatly reduced by concentrating on only a few holdings. *Buy companies with strong histories of profitability and with a dominant business franchise. *You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right. *Be fearful when others are greedy and greedy only when others are fearful. *Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market. *The ability to say 'no' is a tremendous advantage for an investor. *Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell. *Lethargy, bordering on sloth should remain the cornerstone of an investment style. *An investor should act as though he had a lifetime decision card with just twenty punches on it. *As a group, lemmings have a rotten image, but no individual lemming has ever received bad press. *An investor needs to do very few things right as long as he or she avoids big mistakes. *Focus on return on equity, not earnings per share. *Calculate "owner earnings" to get a true reflection of value. *Look for companies with high profit margins. *Growth and value investing are joined at the hip. *The advice "you never go broke taking a profit" is foolish. *It is more important to say "no" to an opportunity, than to say "yes". *Always invest for the long term. *Does the business have favourable long term prospects? *It is not necessary to do extraordinary things to get extraordinary results. *Remember that the stock market is manic-depressive. *Wide diversification is only required when investors do not understand what they are doing. *An investor should ordinarily hold a small piece of an outstanding business with the same tenacity that an owner would exhibit if he owned all of that business. *Stop trying to predict the direction of the stock market, the economy, interest rates, or elections.
