Wednesday, January 28, 2009

20 Billion Dollar Investment Tips from Warren Buffet

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful.

Don’t worry about what the stock market will do, focus on what the company will do.

Find companies with endless demand for their products.

Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.

I enjoy what I do, I tap dance to work every day. I work with people I love, doing what I love. I spend my time thinking about the future, not the past.

It’s not about the biggest motor, but the most efficient motor.

Do business with people you like and who share your objectives.

Be flexible enough to change or evolve your investment strategies when sound judgment and conditions deter.

If we forced ourselves to write down why we were purchasing a stock it might keep us from making some dumb decisions.

We have no exit to strategy –we buy to keep

Our favorite holding period is forever.

Learn as much as possible about the people managing the business.

I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years."

Bad news is an investor's best friend. It lets you buy a slice of America's future at a marked-down price.

A business you understand, favorable long-term economics, able and trustworthy management, and a sensible price tag.

I'm a big believer in betting on what you know about instead of some unknown.

In stocks, it’s the only place where when things go on sale, people get unhappy. If I like a business, then it makes sense to buy more at 20 than at 30.

Be suspicious of companies that trumpet earnings projections and growth expectations.

Whenever we buy common stocks for Berkshire's insurance companies (leaving aside arbitrage purchases), we approach the transaction as if we were buying into a private business. We look at the economic prospects of the business, the people in charge of running it, and the price we must pay.

Almost everything we learn is from public documents. ... We do not find it particularly helpful to talk to managements. ... The numbers tell us a lot more than the managements. We don't give a hoot about anyone's projections. We don't want even want to hear about it.

We are willing to hold a stock indefinitely so long as we expect the business to increase in intrinsic value at a satisfactory rate . . . we do not sell our holdings just because they have appreciated or because we have held them for a long time.

If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period? Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they feel elated when stock prices rise and depressed when they fall. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.

If you are a know-something investor, able to understand business economics and to find five to ten sensibly priced companies that possess important long-term competitive advantage, conventional diversification makes no sense for you.

Charlie and I let our marketable equities tell us by their operating results, not by their daily, or even yearly, price quotations, whether our investments are successful. The market may ignore business success for a while, but eventually will confirm it.

We have $16 billion in cash not because of any predictions [about a market decline], but because we can't find anything that makes us want to part with that cash. We're not positioning ourselves. We just try to do smart things every day, and if there's nothing smart, then we sit on cash.

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