Warren Buffett – the greatest investor of our age – is the Chairman and CEO of Berkshire Hathaway (NYSE: BRK-A, BRK-B). His proficiency has also made him the third richest man in the world.
His 2011 letter to shareholders was released overnight, our time. You can click here for our take on his latest missive.
As well as being the greatest investor, he also comes close to being the most quotable of our age. Whether you agree with my choices, Buffett’s takes on investing, success, and life in general are priceless and worth the price of admission.
25. “If past history was all there was to the game, the richest people would be librarians.”
24. “The best thing that happens to us is when a great company gets into temporary trouble. … We want to buy them when they’re on the operating table.”
Buffett’s recent US$5 billion investment in Bank of America (NYSE: BAC) is a good illustration. Bank of America, though under significant regulatory and global economic pressure, is a long-standing name that’s unlikely to go away.
23. “Someone’s sitting in the shade today because someone planted a tree a long time ago.”
22. “Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results.”
21. “Managers and investors alike must understand that accounting numbers are the beginning, not the end, of business valuation.”
20. “I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.”
19. “Time is the enemy of the poor business and the friend of the great business. If you have a business that’s earning 20%-25% on equity, time is your friend. But time is your enemy if your money is in a low return business.”
18. “You only find out who is swimming naked when the tide goes out.”
Anyone can pick a winner in a bull market. Picking out winners in a declining market is where true greatness is found. The same quote can be applied to businesses laden with debt.
17. “[The] stock market serves as a relocation center at which money is moved from the active to the patient.”
16. “The most common cause of low prices is pessimism — sometimes pervasive, sometimes specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It’s optimism that is the enemy of the rational buyer.”
15. “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
14. “Wall Street is the only place that people ride to work in a Rolls Royce to get advice from those who take the subway.”
13. “Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac’s talents didn’t extend to investing: He lost a bundle in the South Sea Bubble, explaining later, ‘I can calculate the movement of the stars, but not the madness of men.’ If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases.”
12. “You only have to do a very few things right in your life so long as you don’t do too many things wrong.”
You don’t have to be right all the time — you just have to let your winners ride and cut your losers early.
11. “There are all kinds of businesses that Charlie [Munger] and I don’t understand, but that doesn’t cause us to stay up at night. It just means we go on to the next one, and that’s what the individual investor should do.”
10. “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
9. “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
It’s no wonder Warren Buffett doesn’t worry about Chinese accounting scandals.
8. “I am a better investor because I am a businessman and a better businessman because I am an investor.”
7. “I don’t look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.”
In investing, unlike high-diving, there are no points for degree of difficulty. Being roughly right about the easy opportunities is far better than needing to perform a double pike with twist to eke out an extra percentage point in gains in complex areas.
6. “Rule No. 1: never lose money; rule No. 2: don’t forget rule No. 1.”
5. “Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy when others are fearful.”
4. “‘Price is what you pay; value is what you get.”
For a while this probably was my favorite Buffettism. Even a rock-bottom price is too much if there’s little value.
3. “We’ve long felt that the only value of stock forecasters is to make fortunetellers look good. Even now, Charlie and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.”
2. “The stock market is a no-called-strike game. You don’t have to swing at everything — you can wait for your pitch. The problem when you’re a money manager is that your fans keep yelling, ‘Swing, you bum!'”
You never “have” to buy anything. Waiting for the opportunities to come to you will undoubtedly make you a better investor.
1. “When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
What more appropriate way to end than with business-focused investing – a trait we at The Motley Fool proudly share with Warren Buffett.
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A version of this article, written by Sean Williams, originally appeared on fool.com
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