Quotes 7

Bonds have one big advantage over stocks that pay paltry dividends or zero dividends . . . They provide their owners a steady return through thick and thin - or, in the case of a bear market, through thin and thinner. - John Rothchild

Governments on six continents are running record deficits and sinking deeper into debt. When all else fails (it always does) they'll rescue themselves with the printing press, making cash worth less and gold worth more. When all currencies lose their credibility, gold will benefit. - John Rothchild

In the stock market, as with horse racing, money makes the mare go. Monetary conditions exert an enormous influence on stock prices. Indeed the monetary climate - primarily the trend in interest rates and Federal Reserve policy - is the dominant factor in determining the stock market's major direction. - Martin Zweig

When ten people would rather talk to a dentist about plaque than to the manager of an equity mutual fund about stocks, it's likely that the market is about to turn up. When the neighbours tell me what to buy and then I wish I had taken their advice, it's a sure sign that the market has reached a top and is due for a tumble. - Peter Lynch on his 'Cocktail Party' theory of market forecasting

If you're considering a stock on the strength of some specific product that a company makes, the first thing to find out is: what effect will the success of the product have on the company's bottom line? - Peter Lynch

If I could avoid a single stock, it would be the hottest stock in the hottest industry, the one that gets the most favourable publicity, the one that every investor hears about in the car pool or on the commuter train - and succumbing to the social pressure, often buys. - Peter Lynch

Although it's easy to forget sometimes, a share of a stock is not a lottery ticket. It's part ownership of a business. - Peter Lynch

If you remember nothing else about p/e ratios, remember to avoid stocks with excessively high ones. A company with a high p/e must have incredible earnings growth to justify its high price. - Peter Lynch

I got positive feelings when I saw that Taco Bell's headquarters was stuck behind a bowling alley. When I saw those executives operating out of that grim little bunker, I was thrilled. Obviously they weren't wasting money on landscaping the office. - Peter Lynch

When you buy a stock for its book value, you have to have a detailed understanding of what those values really are. At Penn Central, tunnels through mountains and useless rail cars counted as assets. - Peter Lynch

If you can find a company that can get away with raising prices year after year without losing customers (an addictive product such as cigarettes fills the bill), you've got a terrific investment. - Peter Lynch

Some people automatically sell the 'winners' - stocks that go up - and hold on to their 'losers' - stocks that go down - which is about as sensible as pulling out the flowers and watering the weeds. Others automatically sell their losers and hold on to their winners, which doesn't work out much better. Both strategies fail because they're tied to the current movement of the stock price as an indicator of the company's fundamental value. - Peter Lynch

If you know why you bought a stock in the first place, you'll automatically have a better idea of when to say goodbye to it. - Peter Lynch

Just because the price goes up doesn't mean you're right. Just because it goes down doesn't mean you're wrong. Stock prices often move in opposite directions from the fundamentals but long term the direction and sustainability of profits will prevail. - Peter Lynch

Our prototype for occupational fervour is the Catholic tailor who used his small savings of many years to finance a pilgrimage to the Vatican. When he returned, his parish held a special meeting to get his first-hand account of the Pope. Tell us said the eager faithful, just what sort of fellow is he?' Our hero wasted no words. 'He's a forty-four medium.'' - Warren Buffett commenting on the characteristics he likes to see in business executives

A good managerial record (measured by economic returns) is far more a function of what business boat you get into than it is of how effectively you row. Should you find yourself in a chronically-leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks. - Warren Buffett

Many corporate managers deplore governmental allocation of the taxpayer's dollar but embrace enthusiastically their own allocation of the shareholder's dollar [to charities of their own choosing]. We've yet to find a CEO who believes he should personally fund the charities favored by his shareholders. Why, then should they foot the bill for his picks? - Warren Buffett

It's probably true that hard work never killed anyone, but I figure why take the chance. - Ronald Reagan

We believe that according the name 'investors' to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a romantic. - Warren Buffett on the difference between investing and speculating

As time goes on, I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one's risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. - John Maynard Keynes

Our reaction to a fermenting industry is much like our attitude toward space exploration: we applaud the endeavour but prefer to skip the ride. Obviously many companies in high-tech businesses or embryonic industries will grow much faster than will The Inevitables [like Coca-Cola and Gillette]. But we would rather be certain of a good result than hopeful of a great one. - Warren Buffett

Loss of focus is what most worries Charlie [Munger] and me when we contemplate investing in a business that looks outstanding. All too often, we've seen value stagnate in the presence of hubris or boredom that caused the attention span of managers to wander. Would you believe that not a few decades back they were growing shrimp at Coke and exploring for oil at Gillette? - Warren Buffett

It's far better to buy a wonderful company at a fair price, than a fair company at a wonderful price. Now, when buying companies or common stocks, we look for first-class businesses accompanies by first-class managements. - Warren Buffett

The most common cause of low prices is pessimism - sometimes pervasive, sometimes specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It's optimism that is the enemy of the rational buyer. - Warren Buffett

Stocks can't outperform businesses indefinitely. Indeed, because of the heavy transaction and investment management costs they bear, stockholders as a whole and over the long term must inevitably underperform the companies they own. If American business, in aggregate, earns about 12% on equity annually, investors must end up earning significantly less. Bull markets can obscure mathematical laws, but they cannot repeal them. - Warren Buffett

Earnings should only be retained [as opposed to being paid out as dividends] when there is a reasonable prospect that for ever dollar retained by the corporation, at least one dollar of market value will be created for owners. This will happen only if the capital retained produces incremental earnings equal to, or above, those generally available to investors. - Warren Buffett

One of the ironies of the stock market is the emphasis on activity. Brokers, using terms such as 'marketability' and 'liquidity', sing the praises of companies with high share turnover. But investors should understand that what is good for the croupier is not good for the customer. A hyperactive stock market is the pickpocket of enterprise. - Warren Buffett

In the search for companies to acquire, we adopt the same attitude one might find appropriate in looking for a spouse: it pays to be active, interested, and open-minded, but it does not pay to be in a hurry. - Warren Buffett

A company that wants to use its own stock as currency for an acquisition has no problems if the stock is selling in the market at full intrinsic value. But suppose it is selling at only half intrinsic value. In that case it is faced with the unhappy prospect of using a substantially undervalued currency to pay for a fully valued property [the negotiated price of the target company]. In effect the acquirer must give up $2 of value to receive $1 of value. Under such circumstances, a marvellous business purchased at a fair sales price becomes a terrible buy. For gold valued as gold cannot be purchased intelligently through the utilization of gold valued as lead. - Warren Buffett

Small is good, micro is not. For the littlest companies, it's like auditioning for the chorus line: one misstep and you're out. I've made it a practice to stay away from the start-ups, the tiny techs, the near-venture-capital situations. I want companies that are established and whose management have proven, at least thus far, that they know how to run a company. - Ralph Wanger