- When we buy a business, the sellers go on running it just as they did before the sale
- Berkshire is my first love and one that will never fade: At the Harvard Business School last year, a student asked me when I planned to retire and I replied, “About five to ten years after I die.”
- For an increase in profits to be evaluated properly, it must be compared with the incremental capital investment required to produce it
- In our See’s Purchase, Charlie and I had one important insight: we saw that the business had untapped pricing power
- These managers therefore truly stand in the shoes of owners
- Much of my enthusiasm for this purchase came from Frank’s willingness to continue as CEO. Like most of our managers, he has no financial need to work but does so because he loves the game and likes to excel
- The stock market serves as a relocation center at which money is moved from the active to the patient
- We continually search for large businesses with understandable, enduring, and mouth-watering economics that are run by able and shareholder-oriented management
- Charlie and I are simply not smart enough, considering the large sums we work with, to get great results by adroitly buying and selling portions of far-from-great businesses. Nor do we think many others can achieve long-term investment success by flitting from flower to flower.
- If my universe of business possibilities was limited, say, to private companies in Omaha, I would, first, try to assess the long-term economic characteristics of each business; second, assess the quality of the people in charge of running it; and, third, try to buy into a few of the best operations at a sensible price. I certainly would not wish to own an equal part of every business in town.
- (Apple), or even brilliant merchandising (Wal-Mart). We will never develop the competence to spot such businesses early. Instead, I refer to business situations that Charlie and I can understand and that seem attractive - but in which we nevertheless end up sucking our thumbs rather than buying.
- There is no tougher job in corporate America than running an airline: Despite the huge amounts of equity capital that have been injected into it, the industry, in aggregate, has posted a net loss since its birth after KiKy Hawk.
- We assembled a collection of exceptional businesses run by equally exceptional managers
- The only value of stock forecasters is to make fortune tellers look good - Short-term market forecasts are poison
- We’re looking for companies with excellent economic characteristics and management that we like, trust, and admire
- I revised my strategy and tried to buy good businesses at fair prices rather than fair businesses at good prices
- When we allocate capital today, we are thinking about what will maximize look- through earnings 10 years from now
- It’s only when the tide goes out that you learn who’s been swimming naked
- We reject more than 98% of the business we are offered
- Charlie and I continue to like the insurance business, which we expect to be our main source of earnings for decades to come
- How Warren Buffett selects companies
o A business we can understand
o With favorable long-term prospects
o Operated by honest and competent people
o Available at very attractive prices
- Growth is always a component of value
- Growth benefits investors only when the business in point can invest at incremental returns that are enticing
- Leaving the question of price aside, the best business to own is one that over an extended period can employ large amounts of incremental capital at very high rates of return
o Unfortunately, these businesses are very hard to find. Most high-return businesses need relatively little capital
- We try to stick to businesses we believe we understand
- If a business is complex or subject to constant change, we’re smart enough to predict future cash flows
- An investor needs to do very few things right if he or she avoids big mistakes
- If options aren’t a form of compensation, what are they? If compensation isn’t an expense, what is it?
- “How many legs does a dog have if you call his tail a leg?” The answer: “Four, because calling a tail a leg does not make it a leg.” – Abraham Lincoln
- We believe our owner-related policies – including the no-split policy – have helped us assemble a body of shareholders that is the best associated with any widely-held American corporation
- We continue to have an inversion to debt, particularly the short-term kind
- Coke went public in 1919 at $40 per share. By the end of 1920, the market had battered the stock down by more than 50% to $19.50. at yearend 1993, that single share, with dividends reinvested, was worth more than $2.1 million
- We look for good-sized operating businesses that possess economic characteristics ranging from good to terrific, run by managers whose performance ranges from terrific to terrific.
- We prefer to focus on the economic characteristics of the business that we wish to own and the personal characteristics of managers with whom we wish to associate
- 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
- In an investment lifetime, it’s just too hard to make hundreds of smart decisions. Indeed, we’ll now settle for one good idea a year.
- The true investor welcomes volatility
- After we buy a stock, we would not be disturbed if markets closed for a year or two. We don’t need a daily quote on our 100% position in See’s or H.H. Brown to validate our well-being.
- As Peter Lynch says, stocks of companies selling commodity-like products should come with a warning label: “Competition may prove hazardous to human wealth”
- Every investor will make mistakes. But by confining himself to a relatively few, easy- to-understand cases, a reasonably intelligent, informed, and diligent person can judge investment risks with a useful degree of accuracy
- By periodically investing in an index fund, the know-nothing investor can outperform most investment professionals. When “dumb” money acknowledges its limitations, it ceases to be dumb
- What a difference a pair of managers like this makes, even when their products have been around for 100 years
- When you combine ignorance and borrowed money, you can get some interesting consequences
- The more certain we feel about a business, the closer we are willing to play it
- You can judge management by three yardsticks (thước đo): Làm thế nào để đánh giá ban điều hành, thứ nhất hãy xem những gì họ đã làm được, thứ 2 hãy xem cách phân bổ vốn của họ, th71 3 hãy xem họ đối xử với những ông chủ thế nào?
o How well they run the business (look at the track record)
o Seeing how they have allocated capital over time
o How well they treat their owners
- Charlie and I have 2 jobs: identify and keep good managers interested and capital allocation
- Treat your partner the way you want to be treated like yourself
- We think our stock is more likely to be rationally priced over time following the present policies than if we were to split in some major way
- Charlie and I don’t read anything about what the economy is going to do or what the market is going to do
- At Berkshire, it makes no difference to us what accounting treatment we get on something. We are interested in the economics of a transaction
- The companies earn unusual returns on equity. They earn unusual returns on sale
- Some companies are a lot easier to understand than others. And Charlie and I don’t like difficult problems.
- You don’t have to do exceptional things to get exceptional results
- The big thing to do is avoid being wrong
- All we want to be is in businesses that we understand, run by people that we like, and priced attractively compared to the prospects
- If we’re right about a business, it would be very foolish for us to not act on that because we thought something about what the market was going to do
- The best thing that can happen to Berkshire over time, is to have markets that go down a tremendous amount
o If you’re going to be a buyer of groceries over time, you like grocery prices to go down
o What we fear is an irrational bull market that’s sustained for some long period
o If you’re right about the business, you’ll end up doing fine
- Charlie and I are very risk-averse by nature
- The value of every business is 100% sensitive to interest rates. The higher interest rates are, the less the present value is going to be
- If we have cash, it’s because we haven’t found anything intelligent to do with it that day
- We would never have an asset allocation meeting
- The best purchases are usually made when you must sell something to raise the money to get them because it just raises the bar a little bit that you jump over in the mental decisions
- I think you could be in someplace where the mail were delayed three weeks, and the quotations were delayed three weeks, and I think you could do just fine in investing
- Berkshire is incredibly decentralized
- One of the best things that could happen to shareholders is the market going down and you being able to buy good businesses at foolish prices
- If you asked us whether Berkshire would be better off if the whole stock market were down 50% or where it is now, we would be better off if it was down 50%
- If we like something well enough to buy a put on it, we’re probably better off buying the security itself
- If you don’t understand the businesses, then you’re better off diversifying and widely diversifying
- When I ran the partnership, the limit I got towas about 40% in a single stock
- Size is a disadvantage
- We don’t hedge currencies. We don’t think our opinion on currencies is any good
- But the economic value of any asset, essentially, is the present value, the appropriate interest rate, of all the future streams of cash going in or out of the business. And there are all kinds of businesses that Charlie and I don’t think we have the faintest idea what that future stream will look like. And if we don’t have the faintest idea what the future stream is going to look like, we don’t have the faintest idea of what it’s worth, now.
- The numbers in any accounting report mean as to economic value
- There is a huge difference in a business that grows and requires a lot of capital to do so, and a business that grows, and doesn’t require capital
- About capital allocation: And yet, probably relatively few chief executives are either trained for or are selected on, the basis of their ability to allocate capital. I mean, they get there through other routes. So, I’ve said it’s like somebody playing the piano all their life, and then getting to Carnegie Hall and they hand him a violin. I mean, it is a different function than most — than the route — than the functions that exist along the routes to the CEO’s job at most companies.
- The purchase at sensible prices of businesses that have good underlying economics and are run by honest and able people – is certain to produce reasonable success. We expect therefore to keep on doing well
- We will continue to ignore political and economic forecasts
- We usually made our best purchases when apprehensions about some macro events were at peak
- Ben Graham taught me that in investing it is not necessary to do extraordinary things to get extraordinary results
- Berkshire has many old managers over 65
- Go to where the puck is going to be, not to where it is
- The skill with which a company’s managers allocate capital has an enormous impact on the enterprise’s value
- A really good business generates far more money than it can use internally
- In all instances, we pursue rationality
- An insurance business is profitable over time if its cost of float is less than the cost the company would otherwise incur to obtain funds
- We like companies with enduring competitive advantages that are run by able and owner-oriented people
- It is folly to forego buying shares in an outstanding business whose long-term future is predictable, because of short-term worries about an economy or a stock market that we know to be unpredictable
- A prime rule of investing: You don’t have to make it back the way that you lost it
- The ownership of Berkshire is stable, and it will be stable for a very long period
- Most managers, when using their own money, understand that money costs money
- Berkshire is one of a kind in terms of its capital strength in the business
- We’re trying not to get into things we don’t understand
- One of the important things in stocks is that the stock doesn’t know you own it
- Derivatives often combine borrowed money with ignorance, and that is a rather dangerous combination
- The question always is what the average return on capital will be
- Most everything we say is no
- Because of the size, it’s not easy to find things to do that make sense with lots of money
- We are trying to look at businesses in terms of what kind of cash can they produce
- We’re trying to find a business with a wide and long-lasting moat around it – protecting a terrific economic castle with an honest lord in charge of the castle.
o All moats are subject to attack in a capitalistic system
o We try to figure out what’s going to keep the castle standing or cause it not to be standing 5, 10, 20 years from now
- Value and growth are joined at the hip
- If you want to attract high-grade people, you probably ought to try and behave well yourself
- And the best businesses, by definition, are going to be businesses that earn very high returns on capital employed over time. So, by nature, if we want to own good businesses, we’re going to own things that have relatively little capital employed compared to our purchase price.
- About circle of competence:
- We don’t have any sector allocation theories whatsoever
- Cash is always something good to have in case of a big market drop
- Ben would not have disagreed with the proposition that if you can find a business with a high rate of return on capital you can keep using more capital on that —that’s the best business in the world. And of course, he made most of his money out of GEICO, which was precisely that sort of business.
- If you own a lousy business, you must sell it at some point. If you own a wonderful business, you know you don’t want turnover.
- Stay away when a company’s accounting is confusing
- Accounting can offer you a lot of insight into the character of management
- The intelligent use of cash is something you look for in management
- It earns good returns on invested capital, or we wouldn’t be buying into it. We always look for good returns on capital.
- There’s no chance we’ll be in businesses we don’t understand, and I won’t understand it
- I’ve mainly learned by reading myself, so I don’t think I have any original ideas.
- So, I think you can learn from other people. I think if you learn reasonably well from other people, you don’t have to get any new ideas or do much on your own. You can just apply the best of what you see
- Study history to become a great investor
- You can’t make a good deal with a bad person
- I pay no attention to stock ratings. It doesn’t mean anything. It’s too bad they must put that there
- We’re trying to buy businesses we want to own forever. If you’re thinking that way, you might as well see what it’s been like to own them forever.
- I see nothing wrong with a company having a negative shareholders’ equity
- Opportunity costs: “Why would I rather have this over Coca-Cola?”
o Compare everything with the best opportunity you have
- We want to be in the business that 10 years from now is earning a whole lot more money than it is now and that we will still feel good about the prospects of the business at that time
- I want to build a collection of companies that have excellent economic characteristics and that are run by outstanding managers
- Most deals do damage to the shareholders of the acquiring company
- We believe a lot in reverse engineering
- The constant challenge for Charlie and me is to allocate capital as we go along
- I have very close to 100% of my net worth in Berkshire
- I like to be associated with managers whom I would love to have as a sibling, in-law, or trustee of my will
- Thinking back over the 1965-1995 period, I can’t recall that a single key manager let Berkshire to join another employer
- All our operations, including those whose earnings dropped last year, benefit from exceptionally talented and dedicated managers
- Many of our managers don’t have to work for a living, but simply go out and perform every day for the same reason that wealthy golfers stay on the tour: they love what they’re doing.
- A bad insurance contract is easy to enter and impossible to exit
- In businesses, I look for economic castles protected by unbreachable “Moats”.
- Our basic goal as an owner is to behave with our managers as we like our owners to behave with us
- Our managers operate with extraordinary autonomy (quyền tự chủ phi thường)
- The key is not what it does to book value per share, but what it does to intrinsic value per share
- If you’re repurchasing shares above a rationally calculated intrinsic value, you are harming your shareholders
- If it’s a wonderful business, we probably come up with higher intrinsic value than most people do
- We have enormous respect for the power of really outstanding business. And we recognize how scarce they are (nhận ra chúng khan hiếm đến mức nào).And if management wishes to further intensify our ownership by repurchasing shares, we applaud. (hoan nghênh)
- One thing to remember: in the end, the owners of businesses, in aggregate, cannot come out any better than the businesses come out
- Float is money we hold that doesn’t belong to us
- We believe in trying to stick with businesses where we think we can see the future reasonably well.
- The main thing you can’t find in annual reports is to learn about the person who’s running the business and how they think about the business and what’s going on in the business
- I can’t be an intelligent owner of a business unless I know what all other businesses in that industry are doing
- Berkshire is not a one-man show. It’s a two-man show, in terms of capital allocation. But it’s run by managers who are doing an outstanding job and who don’t need any guidance from Charlie or me as they go along.
- The other thing we do besides allocating capital is to identify great managers. And hopefully, we make it attractive for them to stay and work for Berkshire.
- A really great business does not require good management. I mean, that’s a terrific business. And the poor business can only succeed, or even survive, with great management
- We look for people who know their businesses, love their businesses, love their shareholders, and want to treat them as partners
- Only invest in companies led by managers with an outstanding track record
- Diversification is a protection against ignorance
o If you know how to analyze businesses and value businesses, it’s crazy to own 50 stocks or 40 stocks, or 30 stocks, probably, because there aren’t that many wonderful businesses that are understandable to a single human being
o There is less risk in owning three easy-to-identify, wonderful businesses than there is in owning 50 well-known big businesses
o If you find three wonderful businesses in your life, you’ll get very rich. And if you understand them – bad things aren’t going to happen to those three
- People don’t like to sit around all day and do nothing
- If you feel you must invest every day, you’re going to make a lot of mistakes
- He keeps learning. That’s one of his tricks.
- A great company is one that’s going to remain great for 30 years
- Phil has done awfully well by finding business he likes, and sticking with them, and not worrying too much about what they do day to day
- People’s investment would be more intelligent if stocks were quoted about once a year
- We are not trying to predict markets. We never will try and predict markets. We’re trying to find wonderful businesses
- I don’t like a business that can do well for 300 years and then make one mistake and be behind.
- There are two things that really count
o Volatility is a good thing
o Having decent (khá) returns on equity
- The best businesses require no capital. This means that if you double the size of the business, you don’t need any more capital. And those companies are wonderful businesses. And we’ve got a few of those
- Our managers expect to be running their businesses for a long, long time. They see themselves as part-owners of the business.
- It isn’t the learning that’s so hard. It’s the unlearning
- I would recommend 2 books: “Common Stocks and Uncommon Profits” by Phil Fisher and “Path to Wealth Through Common Stocks”
- “Warren talks about these discounted cash flows. I’ve never seen him do one.” – Charlie Munger
- Think of investing as owning a business and not buying something that wiggles around in price
- In investing, you don’t have to do anything very smart. You just must avoid doing things that are ungodly dumb.
- We just try to do things that make sense
- We are interested in businesses that provide cash rather than use up cash
- All retail is competitive
- What counts at Berkshire is intrinsic value, not book value
- We can’t guarantee results. We do promise you, however, that virtually all the gains Berkshire makes will end up with shareholders. We are here to make money with you, not off you.
- We seek 2 business characteristics: excellent business economics and an outstanding manager
- Selling fine businesses on “scary” news is usually a bad decision
- In insurance, virtually all surprises are unpleasant
- For Geico: “Our goal is not to widen our profit margin but rather the price advantage we offer customers.”
- In investing, inactivity strikes us as intelligent behavior
- You simply want to acquire, at a sensible price, a business with excellent economies and able, honest management
- You can pay too much for even the best of businesses
- You only must evaluate the companies within your circle of competence
- You only need 2 investment courses:
o How to Value a Business
o How to Think About Market Prices
- Your goal as an investor is to buy, at a rational price, an easily-understandable business whose earnings are virtually certain to be materially higher five, ten, and twenty years from now.
- If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes
- It only takes 3 quality companies to invest in to be set for a lifetime.
- Companies are worth more money if interest rates fall and stocks rise
- Everyone should read the talk of Charlie Munger’s speech to the University of California Business School in 1994 before investing
- The larger the amount of capital you work with, the more difficult the job is
- Volatility is a huge plus to the real investor
- The stock market is there to serve you, and not to instruct you.
- As an investor, you should love big swings because it means more things are going to get mispriced
- My idea of understanding a business is that you’ve a pretty good idea where it’s going to be in 10 years
- Gambling may be illegal, but now you can do it through something called derivatives.
- I can hardly imagine a world where the wise people don’t do a lot of reading
- We have no meetings. No committees. No slide presentation. I just read a lot
- “Warren lives one of the most rational lives I’ve ever seen. And it’s almost unbelievable.” – Charlie Munger
- All we do is try to figure out what businesses are going to be worth in ten or 20 years
- Investing is putting out money to get more money back later
- Opportunity costs are a very useful filter for investing
o When someone shows me a business, the first thing I would think about is whether this would be a better investment than Coca-Cola
- If interest rates go higher, the valuation goes down automatically
- The biggest thing to do is understand the business
- The best thing to do is learn from other guys’ mistakes
- “I think most people get very few, what I call, no-brainer opportunities, where it’s just so damn obvious that this is going to work. And since they are very few and they may be separated by periods of years, I think people have to learn to have the courage and the intelligence to step up in a major way when those rare opportunities come by.”- Charlie Munger
- “We don’t pay dividends because we think we can turn every dollar we retain into more than a dollar of market value.” à or dividend tax? J
- Professional sellers of investment advice have an immense vested interest (có quyền lợi lớn)in believing that things that can’t be true are true
- The name of the game is continuing to learn
- We don’t care if the market closes for the next 5 years
- Most of our managers do not need to work for a living. They run their businesses for the same reason Charlie, and I run Berkshire. They love doing it.
- We let our managers run their own operations
- We look for brains, energy, and integrity in people that we work with. If you get that combination and you’re in a decent business, you know, you can own the world
- Everything should be made as simple as possible, but not simpler
- “Why risk losing what you need and have for what you don’t need and don’t have?”
- Borrowed money usually leads to trouble. And it’s not necessary.
- There aren’t that many super businesses in the world.