o The critical investment factor is determining the intrinsic value of a business and paying a fair or bargain price. o Never invest in a business you cannot understand. o Risk can be greatly reduced by concentrating on only a few holdings. o Stop trying to predict the direction of the stock market, the economy, interest rates, or elections. o Buy companies with strong histories of profitability and with a dominant business franchise. o You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right. o Be fearful when others are greedy and greedy only when others are fearful. o Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market. o It is optimism that is the enemy of the rational buyer. o As far as you are concerned, the stock market does not exist. Ignore it. o The ability to say “no” is a tremendous advantage for an investor. o Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell. o Lethargy, bordering on sloth should remain the cornerstone of an investment style.o An investor should act as though he had a lifetime decision card with just twenty punches on it.o 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.o As a group, lemmings have a rotten image, but no individual lemming has ever received bad press. o An investor needs to do very few things right as long as he or she avoids big mistakes. o “Turn-arounds” seldom turn. o Is management rational? o Is management candid with the shareholders? o Does management resist the institutional imperative? o Do not take yearly results too seriously. Instead, focus on four or five-year averages. o Focus on return on equity, not earnings per share. o Calculate “owner earnings” to get a true reflection of value. o Look for companies with high profit margins. o Growth and value investing are joined at the hip. o The advice “you never go broke taking a profit” is foolish. o It is more important to say “no” to an opportunity, than to say “yes”. o Always invest for the long term. o Does the business have favourable long term prospects? o It is not necessary to do extraordinary things to get extraordinary results. o Remember that the stock market is manic-depressive. o Buy a business, don’t rent stocks. o Does the business have a consistent operating history?o Wide diversification is only required when investors do not understand what they are doing. o 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.
(extracted from various books on Buffett including “Buffett: the Making of an American Capitalist”, “Buffettology”, “The Warren Buffett Way” and “Of Permanent Value”, “Thoughts of Chairman Buffett : Thirty Years of Unconventional Wisdom from the Sage of Omaha”)