Warren Buffett is the most influential value investor today and has made some of the most profound and notable statements in investing. We list our 10 favorite quotes ranked in descending order:
10. It’s better to hang out with people better than you. Pick out associates whose behavior is better than yours and you’ll drift in that direction.
Value Investing isn’t very difficult to grasp, but it is hard to stick to the plan laid out in the face of declining share prices. By associating yourself with others who are disciplined investors and can help you stay the course you will be far ahead of many investors.
9. Our favorite holding period is forever.
Not only do we believe this is a key differentiator of value investors, but our tools are build to assume you will hold stocks forever. You can read about our Intrinsic Stock Value Calculator and our point of view on How Long You Should Hold Stocks.
8. What an investor needs is the ability to correctly evaluate selected businesses. Note that word “selected”: You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.
Our belief is that the first step to becoming a successful value investor is to screen our most stocks. You will then have the ability to read their annual reports and calculate the company’s intrinsic value. Taking this approach makes value investing a management endeavor, otherwise you will risk the very real possibility of information overload and not being able to use your time efficiently to find quality companies. You can read more about our investment approach by clicking here.
7. Someone’s sitting in the shade today because someone planted a tree a long time ago.
Value Investing is a long term view of companies and their performance. It requires that you build a foundation, invest based on value investing principles and wait for your investments to grow, until they can provide the shelter you invested to get. Our approach to building a strong foundation starts here.
6. There seems to be some perverse human characteristic that likes to make easy things difficult.
Value Investing is fairly straight forward. The basic principle is to buy stocks when they are a bargain. There are many investing approaches that try to predict things that are unpredictable, but at the end of the day what the company does, how it’s customers respond to the company’s products, and how disciplined management is are the basic requirements to solid investing.
5. It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
This quote strikes at the heart of finding quality companies to invest in. It is worth doing the extra work up front to ensure that the stocks you purchase are backed by companies that have solid management and operations.
4. You only have to do a very few things right in your life so long as you don’t do too many things wrong.
Screen diligently, and don’t take shortcuts. Read financial statements, and look for long term consistent performance. Doing those 3 things should minimize the risk of going down the wrong path in value investing.
3. Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.
You can’t argue with those rules. Achieving that feat is another story, but avoiding pitfalls like selling in down markets, or listening to irrational “experts” should be a good start. As long as you stick to the fundamentals you should be in a better position than most to never lose money.
2. Risk comes from not knowing what you’re doing.
Do your homework.
1. Price is what you pay. Value is what you get.
This short quote is at the heart of what value investing tries to achieve. And the difference between the price you paid and the value you get is the gain on your investment. See how we approach the intrinsic value problem.
Do you have a favorite Warren Buffett quote? Let us know in the comments below or contact us.