From Do You Feel Lucky? Maybe Investors Should


But aren't individuals at the mercy of high-speed traders and institutional investors with giant portfolios?

"I think a lot of that talk is nonsense," Mr. Cloonan says. "Institutions are very short-term, constantly trading in and out. They're more concerned about not doing worse than average than they are about trying to think originally as investors."

For investors who are patient and disciplined, do their research and don't get caught up in the Wall Street game of trading too much, "it's easier than it's ever been to do pretty well," Mr. Cloonan says. "You just have to decide to do the right thing."

good quotes

“If you own the best dealership, the top bank, and the finest restaurant in town, you will do well.”
― Charlie Munger on Diversification

“I’m not interested in meeting management today… I’m more interested in finding out how a person has behaved in the past.”
― Bruce Berkowitz

“Successful investors tend to be unemotional, allowing the greed and fear of others to play into their hands. By having confidence in their own analysis and judgement, they respond to market forces not with blind emotion but with calculated reason. Successful investors, for example, demonstrate caution in frothy markets and steadfast conviction in panicky ones. Indeed, the very way an investor views the market and it’s price fluctuations is a key factor in his or her ultimate investment success or failure.”
― Seth Klarman


“The most successful horse players (I guess they lose the least) are the ones who don’t bet on every race but wager on only those occasions when they have a clear conviction.”
― Joel Greenblatt

During a visit to Columbia Business School many years ago, a student asked Warren Buffett how one could best prepare for an investing career. Mr. Buffett picked up a stack of financial reports he had brought with him and advised the students to read "500 pages like this every day". One of the students in the class happened to be Todd Combs. Mr. Combs took the advice quite literally and eventually got into a habit of reading far more than 500 pages per day. This work ethic contributed to a successful career running a hedge fund and a position at Berkshire Hathaway allocating several billion dollars of capital.

WB criteria for valuation of the market and some quotes

From a Motley Fool article :

In 2001 Buffett explained that determining whether the market is expensive or cheap doesn't have to be complicated. Here's the metric he uses:

The market value of all publicly traded securities as a percentage of the country's business -- that is, as a percentage of GNP. Basically, Buffett divides the total market capitalization of the U.S. stock market by gross national product. GNP measures the value of goods and services that a country's citizens produce regardless of where they live. This includes the value of goods and services that American companies produce abroad.

Buffett : "If the percentage relationship falls to the 70% or 80% area, buying stocks is likely to work very well for you. If the ratio approaches 200% -- as it did in 1999 and a part of 2000 -- you are playing with fire."

The most common way to calculate the market value is by looking up the market capitalization of the Wilshire 5000. The market cap of the Wilshire 5000 was $20.6 trillion. The Federal Reserve Bank of St. Louis has a great website where you can locate GNP ($16.9 trillion). (http://research.stlouisfed.org/fred2/series/GNP/)

Dividing the total market cap by GNP gives 122% indicates that the market is getting pricey.


-We don't spend any time looking back. We figure there is so much to look forward to, there's just no sense thinking of what might have been, it just doesn't make any difference. You can only live life forward. You can perhaps learn something from the mistakes

-Interest rate impact. What you really want to know in investments is what is important and what is knowable. If its unimportant or unknowable, you forget about it. We don't want to pass up a chance to do something intelligent because of some prediction that we're no good on anyway. So we don't read, or listen or do anything based on macro factors, zero.

-Concentrate on what will happen, not on the when. The when is unknowable.

Good checklist for investing

There's a good compilation of questiosn to think of before investing.

The Quality Of Business Earnings - Checklist Of Questions

by Tannor Pilatzke


Here are quotes by WB from here :

“Investing is reporting. I told him to imagine an in-depth article about his own paper. He’d ask a lot of questions and dig up a lot of facts. He’d know The Washington Post. And that’s all there is to it.”

“You need a moat in business to protect you from the guy who is going to come along and offer it (your product) for a penny cheaper.”

“If (you go into a store and) they say ‘I don’t have a Hershey bar, but I have this unmarked chocolate bar that the owner of the place recommends,’ if you’ll walk across the street to buy a Hershey bar or if you’ll pay a nickel more for the (Hershey) bar than the unmarked bar or something like that, that’s franchise value.”



“How much more fruitful it is for us to think about whether the product is likely to sustain itself and its economics than to try to be questioning whether to jump in and out of the stock.”

“If I’m thinking about investing in a specific company, I try to size up their business and the people running it. And as I read annual reports, I’m trying to understand generally what’s going on in all kinds of businesses. If we own stock in one company and there are eight others in the industry, I want to be on the mailing list for the annual reports of the other eight because I can’t understand how my company is doing unless I understand what the other eight are doing. I want perspective on market share, margins, the trend in margins – all kinds of things...”

“It’s amazing how well you can do in investing with what I’d call “outside” information. I’m not sure how useful inside information is. But there’s all kinds of “outside” information around as to businesses. And you don’t have to understand all of them. You just have to understand the ones you’re thinking about investing in. And you can. But no one can do it for you.”

“In my view, you can’t read Wall Street reports and get anything out of them. You’ve got to get your arms around it yourself. I don’t think we’ve ever gotten an idea from a Wall Street report. However, we’ve gotten a lot of ideas from annual reports. Charlie?”


“PUCCI”: Pricing, Units, Costs, Competition and Insiders



“Investors should remember that their scorecard is not computed using Olympic-diving methods: Degree-of-difficulty doesn’t count. If you are right about a business whose value is largely dependent on a single key factor that is both easy to understand and enduring, the payoff is the same as if you had correctly analyzed an investment alternative characterized by many constantly shifting and complex variables.” -- Warren Buffett

For the casual investor, Greenblatt recommends buying a portfolio of 20-30 Magic Formula stocks, holding for one year, and then re-running the process annually.