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Quotes

“Rule No.1 is never lose money. Rule No.2 is never forget rule number one.”

“Shares are not mere pieces of paper. They represent part ownership of a business. So, when contemplating an investment, think like a prospective owner.”

“All there is to investing is picking good stocks at good times and staying with them as long as they remain good companies.”

“Look at market fluctuations as your friend rather than your enemy. Profit from folly rather than participate in it.”

“If, when making a stock investment, you’re not considering holding it at least ten years, don’t waste more than ten minutes considering it.”

“You should invest like a Catholic marries — for life.”

“Wall Street makes its money on activity. You make your money on inactivity.”

“Uncertainty actually is the friend of the buyer of long-term values.”

“The reaction of weak management to weak operations is often weak accounting.”

“A friend of mine spent twenty years looking for the perfect woman; unfortunately, when he found her, he discovered that she was looking for the perfect man.”

The financial consequences of ( mistakes ) are regularly dumped into massive restructuring charges or write-offs that are casually waved off as “nonrecurring.” Managements just love these. Indeed, in recent years it has seemed that no earnings statement is complete without them. The origins of these charges, though, are never explored. When it comes to corporate blunders, CEOs invoke the concept of the Virgin Birth.

– WARREN BUFFETT, in his 2001 letter to shareholders

Warren Buffett’s unparalleled success as an American investor covers fully half a century. An investor canny enough to have entrusted $1,000 to Buffett in 1956 (about $7,700 in 2007 dollars) and never cashed in would have amassed $ 27.6 million by the end of 2006.

1956: Buffett, 26 forms his first investment partnership with $105,000 from family and friends in Omaha, plus $100 of his own.

1958: Buffett buys a five-bedroom stucco house in Omaha for $31,500. He still lives there.

1962: Now a millionaire, Buffett merges five investment partnerships and begins buying stock in Berkshire Hathaway, a struggling textile manufacturer in New Bedford, Mass.

1965: Buffett takes control of Berkshire Hathaway.

1969: Buffett dissolves the partnership and becomes chairman of Berkshire Hathaway, making it his primary investment vehicle. His personal fortune is $25 million.

1973: As the stock market sinks, Berkshire goes on a buying spree. It becomes the largest outside investor in the Washington Post Co.

1976: Berkshire begins buying stock in the troubled Government Employees Insurance Co., or GEICO.

1979: With magazines writing stock market obituaries, Buffett says: “Uncertainty actually is the friend of the buyer of long-term values.”

1983: Buffett makes the Forbes list of wealthiest Americans for the first time. He is worth $620 million.

1988: Berkshire Hathaway is listed on the New York Stock Exchange and is its highest-priced stock, trading at about $4,300 per share.

1989: Berkshire becomes the second-largest stockholder of Coca-Cola, investing $1 billion. In three years, its stake will be worth $3.75 billion. Buffett’s fortune is $3.8 billion.

1993: Forbes names Buffett the richest American. Microsoft’s Bill Gates supplants him in 1994.

2001: For the first time under Buffett, Berkshire’s book value shows a loss, as 9/11 hurts its insurance business. Yet the company outperforms the S&P 500. Buffett reports to shareholder: “My wife and I have never sold a share, nor do we intend to.”

2006: Buffett announces that over time he will give away 85 percent of his stock to charity, mostly to the Bill and Melinda Gates Foundation. Berkshire Hathaway Class A stock tops $100,000 per share.

2007: Berkshire buys railroad stocks. About 27,000 attend the company’s annual meeting in Omaha. Buffett, with a net worth estimated at $52 billion, is ranked the second-richest American.

“Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Isaac’s talents didn’t extend to investing. He lost a bundle in the South Sea Bubble, explaining later; ‘I can calculate the movement of the stars, but not the madness of men.’ If he had not been traumatized by the loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases.”

— Warren Buffett

Buffett’s criteria for “wonderful businesses” include, among others, the following:

They have a good return on capital without a lot of debt.
They are understandable.
They see their profits in cash flow.
They have strong franchises and, therefore, freedom to price.
They don’t take a genius to run.
Their earnings are predictable.
The management is owner-oriented.