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Warren Buffett Quotes

Article Overview: Warren Buffett Quotes

Warren Buffett Quotes

Wide diversification is only required when investors do not understand what they are doing.

Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years.

We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.

Why not invest your assets in the companies you really like? As Mae West said, "Too much of a good thing can be wonderful".

Your premium brand had better be delivering something special, or it's not going to get the business.

Our favourite holding period is forever.

It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.

In the business world, the rearview mirror is always clearer than the windshield.

Only when the tide goes out do you discover who's been swimming naked.

You only have to do a very few things right in your life so long as you don't do too many things wrong.

If a business does well, the stock eventually follows.

There seems to be some perverse human characteristic that likes to make easy things difficult.

Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.

Chains of habit are too light to be felt until they are too heavy to be broken.

Two rules:
1. Preserve the principal
2. When in doubt see Rule #1

A public-opinion poll is no substitute for thought.

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

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

The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.

Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.

The investor of today does not profit from yesterday's growth.

Of the billionaires I have known, money just brings out the basic traits in them. If they were jerks before they had money, they are simply jerks with a billion dollars.

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.

I don't look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.

I always knew I was going to be rich. I don't think I ever doubted it for a minute.

If past history was all there was to the game, the richest people would be librarians.

The smarter the journalists are, the better off society is. [For] to a degree, people read the press to inform themselves-and the better the teacher, the better the student body.

We enjoy the process far more than the proceeds.

You do things when the opportunities come along. I've had periods in my life when I've had a bundle of ideas come along, and I've had long dry spells. If I get an idea next week, I'll do something. If not, I won't do a damn thing.

I buy expensive suits. They just look cheap on me.

Value is what you get.

The only time to buy these is on a day with no 'y' in it.

Let blockheads read what blockheads wrote.

When a management team with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.

I am quite serious when I say that I do not believe there are, on the whole earth besides, so many intensified bores as in these United States. No man can form an adequate idea of the real meaning of the word, without coming here.

The first rule is not to lose. The second rule is not to forget the first rule.

Let us do or die.

We believe that according the name "investors" to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a "romantic".

Risk is a part of God's game, alike for men and nations.

Time is the friend of the wonderful company, the enemy of the mediocre.

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.

I want to give my kids enough so that they could feel that they could do anything, but not so much that they could do nothing.

You've been drafted into a war you didn't start, ... Focus on your customers and lead your people as though their lives depended on your success.

need to recognize that it may often take an extended period for the value of even an outstanding company to catch up with the price they paid.

Your premium brand had better be delivering something special, or it's not going to get the business.

I have no idea on timing. It's far easier to tell what will happen than when it will happen. I would say that what is going on in terms of trade policy is going to have very important consequences.

Cash never makes us happy, but it's better to have the money burning a hole in Berkshire's pocket than resting comfortably in someone else's.

Only when you combine sound intellect with emotional discipline, you get rational behavior.

Perhaps there are other solutions that make more sense than mine, ... However, wishful thinking -- and its usual companion, thumb sucking -- is not among them.

There are three kinds of people in the world: those who can count, and those who can't.

Somebody once said that in looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if they don't have the first, the other two will kill you. You think about it; it's true. If you hire somebody without the first, you really want them to be dumb and lazy.

Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway.

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

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.

Never invest in a business you cannot understand.

Price is what you pay. Value is what you get.

the short term the market is a popularity contest; in the long term it is a weighing machine.

The critical investment factor is determining the intrinsic value of a business and paying a fair or bargain price.

Stop trying to predict the direction of the stock market, the economy, interest rates, or elections.

Risk can be greatly reduced by concentrating on only a few holdings.

Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.

It is optimism that is the enemy of the rational buyer.

As far as you are concerned, the stock market does not exist. Ignore it.

The ability to say "no" is a tremendous advantage for an investor.

Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell.

Lethargy, bordering on sloth should remain the cornerstone of an investment style.

An investor should act as though he had a lifetime decision card with just twenty punches on it.

Wild swings in share prices have more to do with the "lemming- like" behaviour of institutional investors than with the aggregate returns of the company they own.

As a group, lemmings have a rotten image, but no individual lemming has ever received bad press.

Turn-arounds seldom turn.

An investor needs to do very few things right as long as he or she avoids big mistakes.

The advice "you never go broke taking a profit" is foolish.

Can you really explain to a fish what it's like to walk on land? One day on land is worth a thousand years of talking about it, and one day running a business has exactly the same kind of value.

For some reason, people take their cues from price action rather than from values. What doesn’t work is when you start doing things that you don't understand or because they worked last week for somebody else. The dumbest reason in the world to buy a stock is because it's going up.

Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well.

We have tried occasionally to buy toads at bargain prices with results that have been chronicled in past reports. Clearly our kisses fell flat. We have done well with a couple of princes - but they were princes when purchased. At least our kisses didn't turn them into toads. And, finally, we have occasionally been quite successful in purchasing fractional interests in easily-identifiable princes at toad-like prices.

“I like to go for cinches. I like to shoot fish in a barrel. But I like to do it after the water has run out."- Oct. 2003 talking with Wharton MBA students.

"The important thing is to keep playing, to play against weak opponents and to play for big stakes."- Nov. 2002 talking with students at Gaston Hall.

There are all kinds of businesses that Charlie 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.

“When they open that envelope, the first instruction is to take my pulse again”. - 2001 Annual Meeting after mentioning that the instructions of his succession are sealed in an envelope at headquarters.

Berkshire’s arbitrage activities differ from those of many arbitrageurs. First, we participate in only a few, and usually very large, transactions each year. Most practitioners buy into a great many deals perhaps 50 or more per year. With that many irons in the fire, they must spend most of their time monitoring both the progress of deals and the market movements of the related stocks. This is not how Charlie nor I wish to spend our lives. (What’s the sense in getting rich just to stare at a ticker tape all day?)

In a bull market, one must avoid the error of the preening duck that quacks boastfully after a torrential rainstorm, thinking that its paddling skills have caused it to rise in the world. A right-thinking duck would instead compare its position after the downpour to that of the other ducks on the pond.

Charlie and I decided long ago that in an investment lifetime it's too hard to make hundreds of smart decisions. That judgment became ever more compelling as Berkshire's capital mushroomed and the universe of investments that could significantly affect our results shrank dramatically. Therefore, we adopted a strategy that required our being smart - and not too smart at that - only a very few times. Indeed, we'll now settle for one good idea a year. (Charlie says it's my turn.)

Success in investing doesn't correlate with I.Q. once you're above the level of 25. 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 get paid for activity, just for being right. As to how long we'll wait, we'll wait indefinitely.

All day you wait for the pitch you like; then when the fielders are asleep, you step up and hit it.

If you understood a business perfectly and the future of the business, you would need very little in the way of a margin of safety. So, the more vulnerable the business is, assuming you still want to invest in it, the larger margin of safety you'd need. If you're driving a truck across a bridge that says it holds 10,000 pounds and you've got a 9,800 pound vehicle, if the bridge is 6 inches above the crevice it covers, you may feel okay, but if it's over the Grand Canyon, you may feel you want a little larger margin of safety..."

You’re neither right nor wrong because other people agree with you. You’re right because your facts are right and your reasoning is right—and that’s the only thing that makes you right. And if your facts and reasoning are right, you don’t have to worry about anybody else.

One’s objective should be to get it right, get it quick, get it out, and get it over... your problem won’t improve with age.

If you don't know jewelry, know the jeweller.

Risk comes from not knowing what you're doing.

The future is never clear, and you pay a very high price in the stock market for a cheery consensus. Uncertainty is the friend of the buyer of long-term values.

The most important quality for an investor is temperament, not intellect... You need a temperament that neither derives great pleasure from being with the crowd or against the crowd.

If a business does well, the stock eventually follows.

When asked how he became so successful in investing, Buffett answered: "we read hundreds and hundreds of annual reports every year.”

You ought to be able to explain why you’re taking the job you’re taking, why you’re making the investment you’re making, or whatever it may be. And if it can’t stand applying pencil to paper, you’d better think it through some more. And if you can’t write an intelligent answer to those questions, don’t do it.

I really like my life. I've arranged my life so that I can do what I want.

Working with people who cause your stomach to churn seems much like marrying for money - probably a bad idea under any circumstances, but absolute madness if you are already rich.

Managers thinking about accounting issues should never forget one of Abraham Lincoln's favorite riddles: `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'.

The speed at which a business success is recognized, furthermore, is not that important as long as the company's intrinsic value is increasing at a satisfactory rate. In fact, delayed recognition can be an advantage: It may give us the chance to buy more of a good thing at a bargain price.

I am out of step with present conditions. When the game is no longer played your way, it is only human to say the new approach is all wrong, bound to lead to trouble, and so on. On one point, however, I am clear. I will not abandon a previous approach whose logic I understand ( although I find it difficult to apply ) even though it may mean foregoing large, and apparently easy, profits to embrace an approach which I don't fully understand, have not practiced successfully, and which possibly could lead to substantial permanent loss of capital.

Ships will sail around the world but the Flat Earth Society will flourish.

I get to do what I like to do every single day of the year. I get to do it with people I like, and I don't have to associate with anybody who causes my stomach to churn. I tap dance to work, and when I get there I think I'm supposed to lie on my back and paint the ceiling. It's tremendous fun.

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Article Tags: billionaires, business schools, business world, chains, diversification, five minutes, folly, habit, holding period, leaks, mae west, many things, market fluctuations, premium brand, principal 2, public opinion poll, rearview mirror, warren buffett, windshield, wonderful company



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How about discussing Costco's biz model?? And CEO - Here's a recent article that covers both.............. Costco: The 'anti-Wal-Mart' The warehouse-club retailer 'has figured out the big, simple things': Hold down expenses and prices, treat employees well, make discount shopping fashionable and keep shareholders happy. By Barron's "Membership has its privileges." That slogan belongs to American Express, but it might better apply to Costco Wholesale, the leading warehouse-club operator in the U.S., whose determination to deliver value and innovative products to its 23 million members has made it one of the country's top retailers. Costco (COST, news, msgs) has succeeded by flouting industry norms. The big-box retailer charges customers a base yearly fee, now $50, to shop in its sprawling stores, which offer quality goods at low markups. Consequently, its margins are among the slimmest in retailing. The privileges also extend to employees, who are paid well and enjoy generous health-care benefits. This formula has generated fierce loyalty among both shoppers and workers while rewarding long-term investors. Costco shares, which traded Thursday around $58, are up from a split-adjusted price of $1.67 when the company went public in 1985. True, they no longer are dirt-cheap, but in view of the company's superior management and opportunities for growth, neither are they rich. Small businesses are big customers at Costco, but the company also has managed to make discount shopping fashionable for affluent Americans by offering fine wines, books and big-screen televisions at low prices, and staples such as paper towels and razor blades in bulk. By offering one-time specials like discounted Prada bags or Callaway golf clubs at individual outlets, Costco has created what it calls a "treasure-hunt" atmosphere in its stores. Not the Wal-Mart way Costco is among a handful of retailers that has flourished despite Wal-Mart Stores' (WMT, news, msgs) onslaught; Wal-Mart's more downscale Sam's Club chain runs second to Costco. With its strong labor relations, low employee turnover and liberal benefits, Costco has been called the "anti-Wal-Mart." Its approach has paid dividends because Costco, based in Issaquah, Wash., hasn't encountered the same community resistance as Wal-Mart when it has sought to open stores. "Retailing isn't rocket science. Costco has figured out the big, simple things and executed with total fanaticism," says Charles Munger, a Costco director for the past 10 years. The outspoken Munger, 82, is better known as Warren Buffett's longtime partner at Berkshire Hathaway (BRK.A, news, msgs), where he serves as vice chairman.Crucial to the chain's success is CEO Jim Sinegal, who co-founded Costco in 1983 with Jeff Brotman, the company's chairman. "Jim would be on any intelligent list of the top 10 retailers of the past century," Munger says. Sinegal, 70, also is one of the biggest bargains among big-company CEOs: In an era of seven- and eight-figure pay packages for CEOs, Sinegal earned a salary of $350,000 in Costco's latest fiscal year, which ended in August. He garnered other compensation of about $100,000. What's more, Sinegal got no bonus last year, after the company determined that it had failed to measure properly the appropriate date for certain option grants from 1996 to 2002, although no evidence of fraud or falsification of records was found. "Jim wouldn't let the board give him a bonus. His view was that the option glitch happened on his watch," Munger says. "How many people behave like that? No wonder everyone loves him." Unlike Buffett, who draws a salary of just $100,000 as the CEO of Berkshire, Sinegal isn't a billionaire. He owns Costco stock worth about $135 million and has options on 1.2 million shares. Sinegal's compensation and demeanor offer a welcome contrast to former Home Depot (HD, news, msgs) CEO Robert Nardelli, who alienated employees with his autocratic style and whose gargantuan exit package of $210 million didn't sit well with shareholders. Video: Behind the scenes at Costco None of this has been lost on the investment community. At nearly $58, Costco trades for 22 times fiscal 2007 projected earnings of $2.58 a share. It has one of the highest price-earnings ratios among major retailers. Target (TGT, news, msgs) shares, at nearly $63, trade for 17 times estimated 2007 earnings, while Wal-Mart, at $48, commands 15 times projected 2007 profits. Though some retailing analysts deem Costco shares expensive, the company seems to qualify under one of Buffett's investment dictums. Buffett has said he'd rather buy a good business at fair price than a fair business at a good price. Berkshire owned 5 million Costco shares at the end of September. Growth and more growth This is a genuine growth story. Earnings per share have increased at a 12% annualized rate in the past five years. Neil Currie, a retailing analyst at UBS Securities, believes the company is capable of generating 13% growth in earnings per share in the next few years and an even higher rate if it gets more aggressive in repurchasing shares. The bullish Currie carries a 12-month price target of $66. With large annual buybacks, Costco could earn more than $4 a share in fiscal 2010, Currie estimates. That could support a stock price of $80. The company plans to open 36 to 40 stores in the current fiscal year and about 35 annually in subsequent years. The store base totaled 474 on Dec. 31, including 371 in the United States. Costco says domestic and international markets ultimately can support more than 1,000 stores. Outside the U.S. and Canada, the most promising markets are likely Mexico, the United Kingdom and Japan. Costco's merchandise sales in its most recent fiscal year rose 14% to $59 billion, while membership fees generated $1.2 billion in revenue. This year, sales are expected to rise more than 10%, reflecting lower prices for gasoline. Sales at stores open at least year, a key gauge of retailing success, were up a healthy 8% in fiscal 2006. Could the company be a candidate for a leveraged buyout? Costco does possess some of the key characteristics that private-equity players seek. It has a strong balance sheet, a predictable cash flow and a durable franchise. Its market value is a hefty $26 billion, but LBOs of that size are doable these days. Costco bought back $1.5 billion of stock in its latest fiscal year and $400 million in the quarter that ended Nov. 30. But it has resisted a large debt-financed buyback like the one under way at Home Depot, and to date it hasn't sought to raise funds through the sale of its real estate. The company takes pride in its impressive financial condition. "Have we gotten to the point in America that balance-sheet strength is a negative?" Munger asks.Currie argues that Costco could keep LBO operators at bay by launching a more aggressive buyback program and taking on a moderate level of debt. "The best way for Costco to protect its independence is to have a high multiple on its stock," the analyst says, adding that an augmented buyback would help achieve that goal. He believes Costco comfortably can repurchase $2 billion or more of stock annually. The dividend yield on the stock is a low 0.9%. Most income from members' fees Its cooperativelike operation makes the retailer's business model unusual. In its latest fiscal year, Costco generated pretax income of $1.75 billion, about 70% of which came from membership fees. An additional $125 million was kicked in by the interest income on the company's cash. Costco earned just $400 million from its stores, for a retailing operating margin of less than 1%. The low margin is intentional and reflects the company's commitment to low prices. As a matter of corporate policy, Costco refuses to mark up any product by more than 15% above its cost. When the company signed a new contract in 2005 with a supplier for Brooks Bros.-style men's cotton and button-down shirts, and got a significant price reduction for a massive two-year order, it immediately cut the price of the shirts to $12.99 from $17.99, notes Richard Galanti, Costco's chief financial officer. Other retailers might have phased in the reduction and captured added profit, but that's not the Costco way. The shirts now cost $14.99 because they are made with better-quality cotton. One attraction in the eyes of a potential buyer would be the opportunity to lift margins. Costco leads Sam's Club in most financial measurements, including total sales, sales per store, sales per square foot of retail space and sales per employee. But Sam's operating profit margin of 3.5% tops Costco's 2.8%. Some complaints on Wall Street If Costco were to raise its margins to Sam's level, it would translate into an additional 65 cents a share of net income -- a large amount relative to the current-year consensus estimate of $2.60 a share. Sinegal has talked in the past about lifting Costco's margins to 4%, but little progress has been made. This has led to some criticism on Wall Street. An analyst report in December, after Costco reported its fiscal-first-quarter profits, was entitled "Still No Margin." Galanti says management has no interest in going private. "The public model has worked for us. We have no plans to change," he says. Video: Behind the scenes at Costco Many Costco shareholders are also happy with the current situation. "Costco refuses to be undersold and thinks so long term that the company will not even remotely degrade the value it gives customers, even if it would fuel a healthy increase in margins and earnings and very few customers would notice," says Ken Charles Feinberg, a co-manager of the Davis New York Venture Fund (NYVTX) and Selected American Shares (SLADX), both run by Davis Selected Advisors. "That's how a great management builds a great business franchise that's built to last." The Davis funds are Costco's largest shareholder, with a 12% stake. Feinberg says that Costco's effective valuation is lower than its stated price-earnings ratio because of the company's conservative approach to depreciation. He recently calculated that Costco trades for about 16 times his projection of calendar "owner earnings." This profit measure adds to operating earnings depreciation expense in excess of what is needed to maintain the existing store base. Feinberg believes Costco is a "compelling bargain" for long-term investors. Sinegal doesn't talk much to Wall Street and wasn't available to speak with Barron's. Even at 70, he maintains a grueling schedule. He aims to visit each Costco store twice a year and is about 70% successful in that goal, Galanti says. This means he's on the road 40 to 45 weeks a year. Costco executives jokingly refer to Sinegal's weekly travels as a "death march" because he usually begins each day at 7 a.m. and finishes at 10 p.m. Dressed in sneakers, khaki pants and Costco's now-$14.99 button-down shirts, Sinegal asks store managers what's selling, what's not and how Costco prices compare with the competition. He has no set plans to retire, although he has talked casually about holding the job for five more years. Because he hasn't set a retirement date, there is no heir apparent. But Costco has a strong group of managers who share Sinegal's passion and vision. Unlike most CEOs, Sinegal has no severance or golden parachute in his contract, which runs less than a page. He insists on one-year contracts, believing the Costco board should have the opportunity to evaluate him annually to determine if he's still up to the job. Sinegal's view is that the restrained terms of his contract send an important message to employees. In the view of Berkshire's Munger, one of Costco's great strengths is that its two founders, Sinegal and Brotman, are still active. Brotman, 64, focuses on real estate. "There is no better site acquisitor in the retailing industry," Munger says. "I'd like to see Jeff get more credit. He deserves it." Costco has chosen to focus on more affluent coastal markets; California alone is home to 30% of its stores. Finding sites for new outlets in densely populated areas is one of Brotman's specialties. The company features products that offer its members large cost savings over what they would pay at traditional retailers. The chain carries just 10% of the items in a typical supermarket, which might stock 40,000 products.The formula works. Costco sold 1.5 million TVs last year and has successfully built what it calls ancillary businesses such as prescription drugs and eyeglasses, filling 26 million prescriptions in 2006. Hungry Costco members bought 63 million hot-dog-and-soda combinations last year at in-store snack bars -- priced at only $1.50 and with free soda refills. The dogs are even kosher. Costco's customer-focused strategy is apparent in its 87% membership-renewal rate. The retailer allows returns on nearly all items at any time, with no questions asked; computers are the lone exception. It doesn't even need to see receipts. This liberal policy has proved costly in the past year because the company is seeing returns of an unusually large number of big-screen TVs. Analysts suspect that many members are taking advantage of the sharp drop in TV prices to return models bought in the past 12 months so they can buy new ones at lower cost. Costco said it is evaluating its TV-return policy but emphasizes that no change will be retroactive and that it still plans to maintain the industry's most generous return policy on electronics. Low turnover among employees Workers get a relatively good deal at Costco -- a point of emphasis for the company, which contends it's also a matter of good business. Despite fewer stores, Costco's sales are about 50% above those of Sam's Clubs, and sales per employee are about $500,000 a year versus $340,000 at the Wal-Mart unit, UBS' Currie calculates. Sinegal was asked in a recent Bloomberg TV interview about the company's health-care benefits. Costco provides health insurance to its 93,000 domestic employees and pays 90% of the cost, which runs about $6,000 annually per employee. Video: Behind the scenes at Costco "We're 100% committed to maintaining this program," Sinegal said. "It works for us, and our people count on it. We think they're entitled to that security." Costco has one of the lowest turnover rates in retailing. Among employees who have been with the company for at least a year, just 6% leave annually. That may be because store employees such as cashiers can earn more than $40,000 a year after only four years on the job. Costco shares aren't a bargain at current levels, but patient investors could be rewarded because the company is an industry leader with top-notch management, a loyal customer base and solid growth prospects in the U.S. and abroad. In Street-speak, Costco may be "under-earning," meaning its profit margins are lower than they need to be. Management is loath to tinker with a successful formula, but margins probably have only one way to go: up. In time, the shares are likely to follow. This article was reported and written by Andrew Bary for Barron's


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