Investment Strategy - Quotes

Dear Readers,

Last two weeks of market fall has given good learning and investment opportunity. Diamond and dust belong to same soil but their ability to resist the heat and pressure makes huge difference in their valuation. It was tough testing time for new investors and market fall has shattered not only the price of good stocks but also confidence level of investors. It is time to refresh with experience of legend investor Warren Buffett, who has characteristics like diamond and defeated several similar situations for decades.

Buffett explains, “To be fearful when others are greedy and to be greedy only when others are fearful.”

"The basic ideas of investing are to look at stocks as businesses, use market fluctuations to your advantage, and seek a margin of safety. That’s what Ben Graham taught us. A hundred years from now they will still be the cornerstones of investing."

There is no hidden secret of investing except below

 Golden Rules

1. Concentrate your investments in good companies run by strong management.

2. Limit yourself to the number of companies you can truly understand.

3. Pick the very best companies, and put the bulk of your investment there.

4. Think long-term.

5. Volatility happens, carry on with all situations.

"Buy business, not stocks, the businesses that willing to own forever. The business which is simple and easy to understand. All you do is buy shares in a great business for less than the business is intrinsically worth and priced attractively relative to their future prospects, with management of the highest integrity and ability. Then you own those shares forever."

"It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price. 

"I want to be in businesses so good even a dummy can make money."

"Look for the durability of the franchise. The most important thing to me is figuring out how big a moat there is around the business. What I love, of course, is a big castle and a big moat with piranhas and crocodiles."

"In evaluating people, you look for three qualities: integrity, intelligence, and energy. If you don’t have the first, the other two will kill you."

"Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be mis-appraised."

"Success in investing doesn’t correlate with IQ. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing."

"We don’t have to be smarter than the rest, we have to be more disciplined than the rest."

When to Buy

When the stock market forces the price of a good business downward.

When a specific risk temporarily punishes a business.

When investor indifference allows a superior business available at half of its intrinsic value

What to Buy

• Is the business simple and understandable, with a consistent operating history and favorable long-term prospects?

• Is it run by honest and competent managers, who allocate capital rationally, communicate candidly with shareholders, and resist the institutional imperative?

• Are the company’s economics in good shape with profit margins, owners’ earnings, and increased market value that matches retained earnings?

• Is it available at a discount to its intrinsic value?

"Investing is not that complicated. You need to know accounting, the language of business. You need the right mind-set, the right temperament. You should be interested in the process and be in your circle of competence." 

Above quotes of Warren Buffett explains complete philosophy of stock market investment. Only need to evaluate our stand and situation with above. It is never too late to realign now.  

I came to the psychology of misjudgment almost against my will, I rejected it until I realized my attitude was costing me a lot of money. - C. Munger