Warren Buffett 'Words of Wisdom'
 
Warren Buffett At Berkshire Hathaway
Warren Buffett At
Berkshire Hathaway

Here, we are going to talk about Warren Buffett and his words of wisdom. We have supplied a series of quotes that throughout his 50 year investing lifetime, Warren Buffett  has utilized to become one of the richest men in the word, and the absolute richest based strictly on investments. If you have followed Warren Buffett’s thinking through the years than you are aware that he uses common sense more than anything else to explain what others would call esoteric investing concepts. He’s really a down to earth guy, who prefers cherry coke to a glass of French wine.

You will also find is that when Buffett talks about a topic, in a sentence or two, he will say more than most so called Wall Street pros can say in an entire page. This is what really makes Buffett stand apart from others in the investment world.

 

Take a few minutes, and enjoy 10  pearls of wisdom. It doesn’t get any better than Warren Buffett, and by the way, we have provided our own understanding of this man in our translation of each quote.

 

I’VE NEVER SWUNG AT A BALL WHILE IT’S STILL IN THE PITCHER’S GLOVE.

 

Translation: Warren Buffett  has always loved baseball. Through the years, He has used analogies from baseball to explain difficult investment concepts. In this case Warren Buffett is talking about staying away from untested companies, or what we would call “ground floor situations”. A company without earnings would be one. A startup is like swinging at a ball while it is still in the pitcher’s glove.

Warren Buffett only wants companies that are already succeeding, companies that have been real world tested. These would be well known brands with superb balance sheets, and a fairly low entry price. Only then would this be the same as swinging just as the ball is passing the plate and you know exactly how it’s going to move. He likes SURE THINGS and you should like sure things too.

 

NEVER ASK A BARBER IF YOU NEED A HAIRCUT.

 

Translation: We love this saying. In Wall Street years ago, we would say, never ask your wife if your girl friend is pretty. There’s an old Wall Street saying that goes, “Ask a surgeon if you need an operation, the answer is ALWAYS yes. Ask a dentist if you need a cleaning and the answer is always yes again. Ask a financial advisor if you need to make changes to your portfolio and the answer is yes.” Many mergers and acquisitions are done on Wall Street because the deal takes on a life of its own. There’s a need to get deals done because that’s where Wall Street profits come from.

We have all heard the line, “Never fix a problem that doesn’t need fixing”. Warren Buffett doesn’t trade, as you may be aware. He always gives his investments time to work out. The key is always to try to get the initial investment right. If you don’t get the initial investment right, you always have a problem down the road. If you can get the initial investment right, and Buffett is very get at that, then TIME will give you the expected profits.

 

IT’S ONLY WHEN THE TIDE GOES OUT THAT YOU LEARN WHO’S BEEN SWIMMING NAKED.

 

Translation: Warren Buffett would tell you that the perfect example of the above statement is Enron, the company that collapsed after assorted frauds, embezzlements, and accounting practices that you wouldn’t believe took place.

World Com, the cell phone company is another example of this quote in action. While these stocks were flying, no one had a clue that there was a problem. We remember the CFO’s of both companies being on the cover of CFO Magazine in different years after being selected CFO of the Year. Both individuals wound up in jail. We had to wait until the TIDE went out, or the schemes were uncovered to know what was going on. Warren Buffett is right.

 

Warren Buffett Stocks

SOMEONE IS SITTING IN THE SHADE TODAY BECAUSE SOMEONE PLANTED A TREE A LONG TIME AGO.

 

Translation: Isaac Newton, the greatest mind of the last five hundred years is quoted as saying, “If I have seen further than others, it is by standing On The Shoulders Of Giants (OTSOG). Others have used this quote as well, including Albert Einstein in the early 20th century.

Warren Buffett believes the same thing as other giants in the mentoring concept. In his case he was fortunate to have been mentored by Benjamin Graham, the father of security analysis who taught at Columbia University in NYC where Buffett got his MBA after being rebuffed by Harvard Business School. Without Graham there probably would have been no Warren Buffett .

We all need someone to help us learn the wisdom of our chosen professions. The carpenter teaches, measure twice, cut once. Ross Perot is fond of stating that one. Yes, there is the concept that cream always rises to the top, but does it? We all need a helping hand, and just the right touch at the right time, is sometimes all one needs to completely fulfill themselves in this life.

 

IF WE CAN’T FIND THINGS WITHIN OUR CIRCLE OF COMPETENCE, WE DON’T EXPAND THE CIRCLE. WE’LL WAIT.

 

Translation: This is another one of the statements that proves Warren Buffett is a genius, perhaps without equal. Buffett took the idea of the Circle of Competence directly from Benjamin Graham who was Buffett’s mentor and finance professor while Buffett was a student at Columbia University. Graham always talked about doing what only what you know. If you are good at something, that’s what you do, that’s what you become the expert at.

Why would a brilliant research doctor who probably knows more about drug creation than 99% of the people on earth go and buy software companies in his own portfolio. Companies that he knows basically nothing about. You stick to what you know. That’s where the money is.

Warren Buffett would demand that you buy only what you know about. If the companies that you know about are not available at the right price now, just don’t invest right now. Buffett would tell you that you do not have to be constantly invested.

You must Invest only in what you understand thoroughly, and the emphasis is on YOU. Warren Buffett and you the investor should never go outside your Circle of Competence. You might remember in the late 1990’s, there was a period when just about every investor was trading in the world of the Internet stocks. For a period of a year they were going straight up. Would you believe that Buffett never invested in one Internet stock during the entire cycle. He was one of the few big investors not to get taken in. Learn from the Master. Meanwhile in Texas the Bass Brothers who made billions in the stock market, were insisting that their investment advisors allocate funds into the Internet stocks. The Basses during this period lost several billion dollars.

 

NO MATTER HOW GREAT THE TALENT OR EFFORTS, SOME THINGS JUST TAKE TIME. YOU CAN’T PRODUCE A BABY IN ONE MONTH BY GETTING NINE WOMEN PREGNANT.

 

Translation: Buffett is the master of compounding. It’s probably hardwired into his brain. In this quote he is talking about compounding, and the time it takes for compounding to KICK IN. This is a vital point that most investors never pick up on. Investors are always looking for stocks that are going to double in a year or two years – that’s why they want tips. Instead, they should be looking for stocks that are going to go up a more reasonable amount, such as 20% or 25% a year for the next 20 years. That’s where the fortunes are made.

Decades ago, Warren Buffett invested only a couple million dollars in the Washington Post newspaper. That couple of million dollars became worth a billion dollars over a period of several years. Buffett always believed that you can’t produce big results in months, or even a couple of years. If however, you buy at the right price, and the right stock, you will make a fortune in time. You need COMPOUNDING to do achieve these kinds of returns.

 

IF CALCULAS OR ALGEBRA WERE REQUIRED TO BE A GREAT INVESTOR, I’D HAVE TO GO BACK TO DELIVERING NEWSPAPERS.

 

Translation: We have seen detailed financial projections based on estimates carried to the third decimal place. Investments based on such projections aren’t worth the paper they are printed on. They are ludicrous as well. Sir John Templeton was the finest mutual fund manager of the 20th century, (Peter Lynch is his superb rival) once told me that investments are mostly common sense.

It would seem that many investors want to make more out of an investment than common sense. They want to use the most advanced formulas, or mathematical models that simply don’t stand up to the test of time. Warren Buffett would tell you that simple mathematics is what you need, and a logical brain that can withstand the emotions, because emotions can get in the way of investing.

 

YOU CAN’T MAKE A GOOD DEAL WITH A BAD PERSON.

 

Translation: This one is absolutely brilliant. You simply can’t do business with bad people. If you are dealing with a bad person then there isn’t a contract that’s strong enough to protect you and your company from that person. Spend some time thinking about it. Why would you want to do a deal with a bad person? There are plenty of GOOD people in the world who will try to do the right thing, and you will not have to look over your shoulder waiting constantly for them to take advantage of you. You need to deal with straight people, and they are out there to deal with.

When Warren Buffett does a deal with an owner of another company, it’s always done via a handshake. The attorneys get involve to simply memorialize the handshake understanding. Buffett is always adamant that he only wants to deal with very GOOD people. If he can’t handshake a deal, how good can the deal be?

Here’s another example of this type of thinking that took place, many years ago, back in the late 1970’s. It was the original IPO of Home Depot. Prior to Home Depot’s IPO, there was a private placement done at five cents a share. A gentleman in Boston was considering putting up several million dollars. Actually, as the deal was being done, he did a handshake and agreed to terms, and then he came back and said, he didn’t want the company to pay for 2 cars that the founders were driving.

It wasn’t a week later that he came back and said he didn’t want the company to pay for health insurance for the 2 founders. The deal died right then and there. This fellow was going to put in a couple of million and it would have become at least $10 billion but he wanted to keep haggling, and change the deal. Keep in mind that you need to get the big things right in a deal. If you want to spend hours haggling over the small things, the movers and the shakers will never deal with you.

 

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.

 

Translation: This is Warren Buffett at his best. Buffett is telling you to ignore trading, because trading is for gamblers. Buffett tries to imagine what the balance sheet of the company he is interested in, is going to look like in 10 years. If he can’t imagine it, he won’t invest. This is why he never touch Lehman Brothers as an investment. He could not understand the balance sheet, and if the master can’t read the balance sheet, he runs away from the investment. This is why he never ever buys a technology company as well. He can’t imagine what the balance sheet looks like years out. Buffett the investor would be leaving too much to chance. Buffett deals with probabilities he can understand.

Buffett has also publicly stated that an investor should never confuse short-term quotational losses with permanent erosion of capital. It is only in the stock market of publicly traded ideas that one can acquire a piece of a company for a price that one would never ever be able to negotiate in a private transaction.

 

THE STOCK MARKET IS A NO-CALLED-STRIKE GAME. YOU DON’T HAVE TO SWING AT EVERYTHING – YOU CAN WAIT FOR YOUR PITCH. THE PROBLEM WHEN YOU’RE A MONEY MANAGER IS THAT YOUR FANS KEEP YELLING, ‘SWING, YOU BUM!’”

 

Translation: Many years ago, I saw Sandy Koufax, one of the two best pitchers I have even seen (Bob Gibson was the other) pitching against Henry Aaron, the man who broke Babe Ruth’s record. It was getting near midnight and it was the end of the game, 9th inning two out. Aaron had fouled off twelve consecutive pitches.

Koufax approached the plate and said, “Hank, I’m tired, you’re tired, the next pitch is going to be a fast ball down the middle, either you strike out or hit a home run, we’re out of here.” Aaron went down on strikes.

The point is that in the baseball game that Warren Buffett plays in, you get to stand at the plate all day, and you never have to hit if you don’t want to. You get to see every pitch. You learn the pitcher, his moves, his technique, his faults, and then only when you want to, if you want to at all, you get to swing the bat. Only in the stock market can you use this technique. You can wait a year or two for the perfect situation to come along, and only then, you play, or you can trade every day as a momentum investor, and see where you wind up.

 

Conclusion

Learn from the wisdom of the greatest investor of the 20th century. Some may disagree, but nobody would argue that everybody else would have to be compared to Warren Buffett.

We hope you have enjoyed this bit of wisdom that we have furnished you. Do take a look at the rest of our Award Winning website, and see whether or not you think we can be of service to you in helping you make a great deal of money by investing in stocks. We are not day traders. We are VALUE PLAYERS, just like Warren Buffett

We are VALUE PLAYERS who seek to conservatively increase your capital while keeping an ever watchful eye on the potential downside as well. Over the last seven years, we have averaged a 30 percent rate of return per year, finding the types of stocks that would fit right in with the value screens that Warren Buffett has in his office at Berkshire Hathaway in Omaha, Nebraska. Good luck to you.

 
 
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