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BULLS & BEARS: Aphorisms from a master: investing tips from Buffett

July 4, 2005

At Independence Day, it seems appropriate to examine quotes from the writings of the quintessential American capitalist, Warren Buffett.

"Mentally, we are always buying businesses. It's just that sometimes we can buy all of them and sometimes we can only buy little pieces of them."

"Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results."

"For the investor, a too-high purchase price for the stock of an excellent company can undo the effects of a subsequent decade of favorable business developments."

"Investing is the greatest business in the world because you never have to swing. You stand at the plate [and] the pitcher throws you General Motors at 47! U.S. Steel at 39! And nobody calls a strike on you. There's no penalty except opportunity. All day you wait for the pitch you like; then, when the fielders are asleep, you step up and hit it."

"The future is never clear and you pay a very high price in the stock market for a cheery consensus. Uncertainty is actually the friend of the buyer of longterm values."

"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."

"The market may ignore business success for a while, but eventually will confirm it. As Ben Graham said, 'In the short run, the market is a voting machine but in the long run it is a weighing machine.'"

"Billy Rose used to say that if you have a harem of a hundred girls, you never get to know any of them very well. The trick is to know a lot about what you own, and you don't own that many things."

"An investor should act as though he had a lifetime decision card with just 20 punches on it. With every investment decision his card is punched, and he has one fewer available for the rest of his life."

"We don't believe in the Noah's Ark principle of investing, winding up with two of everything. Then you have a zoo. We buy very few things, but we buy very big positions."

"To suggest that an investor should sell off portions of his most successful investments simply because they have come to dominate his portfolio is akin to suggesting that the Bulls trade Michael Jordan because he has become so important to the team."

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

"When a management with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it is the reputation of the business that remains intact."

"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."



Ken Skarbeck is managing partner of Indianapolisbased Aldebaran Capital LLC, a money-management firm. Views expressed are his own. He can be reached at 818-7827 or ken@aldebarancapital.com.
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