TAO OF WARREN BUFFET # 17.

Small Business
Small Business

You should look at stocks as small pieces of business.

Sometimes when people invest they forget that they are actually buying a fractional interest in a business.Warren likes to look at stocks as owning a small piece of business.This way he can judge whether he is paying too much for the business.He multiplies the stock price by the number of shares outstanding,then he asks him-selves whether this would be a good deal or bad deal if he were buying the whole business.If the price is too rich to be buying the whole business that the price is too rich for even buying a single share. This thought alone can stop you from foolishly getting caught in the speculative frenzy that often goes with the bull market,for seldom do Wall-street darlings and other fashionable securities sell at prices at which it would make sense to buy the whole business.

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