With each investment you make you should have the courage and conviction to place at least 10% of your net worth in that stock.
Conviction is based on what you know will happen, faith is based on what you hope will happen.To make money in the investment game you need to have conviction,which means that you need to know what you are doing.A surefire way to achieve Warrens level of conviction is to invest significant amounts of money.Thiis causes you to focus and make certain that you have done your homework before you make your investment .But if your investment strategy is based on faith,then you really haven’t a prayer.
You should invest in a business that even a fool can run.because someday a fool will.
There are business with great underlying economics and business with poor underlying economics.You want to invest in companies with great underlying economics because it is hard to damage this kind of business.Companies in which Warren has invested ,such as CocaCola,Budweiser,Walmart,Wrigley’s,Hershey,and H&R Block, are almost dumbproof.You know you are going to make money with these business,even if a fool becomes a CEO.But if you have to worry about a fool running the business,then maybe it is’nt such a great business,and maybe you shouldn’t be in it.
If i cant make money in a $5 trillion U.S market ,it may be a little bit of wishful thinking to think that all i have to do is get a few thousand miles offshore and I’ll start showing my stuff.
The old thing about this quote is that ten years later Warren did go offshore to show his stuff.In 2003 he bought around $500 million worth of PetroChina,an oil company that is 90% owned by Chinese government,which means ,as Warren jokingly remarked , ‘Between the two of us we own the company’. PetroChina is the fourth most profitable oil company in the world.it produces a much crude as Exxon, and Warren bought it at one-third the valuation of Western oil companies.In case you are wondering ,it is up 400% since then.And if that’s not showing your stuff,I dont know what is.
My idea of group decision is looking in the mirror.
Warren is not one to seek affirmation of his ideas from others, because so many of his ideas are the opposite of what the herd is thinking.To make big money in the investment world you have to learn to think independently , to think independently you need to be comfortable standing alone.
Warren has a history of standing alone that dates back to the early days of his investment career. He chose to live in Omaha instead of NYC because there was less influence from Wall street. He bought into Berkshire Hathway when no one wanted it , he bought into American Express when no one wanted it, he bought into the Washington Post Company when no one wanted it.he bought into General Foods when on one wanted it, he bought into RJR Tobacco when no one wanted it, he bought into GEICO when noone wanted it, he bought the bonds of the Washington Public Power Supply System when noone wanted them, and he bought into junk foods when noone wanted them,Some of this investments he still owns, some of them he sold after holding them for a number of years, but on each and every one of them he made a fortune.
If he had taken a vote of confidence from anyone on the Wall street he would have missed the boat on all these great investments.
It is not necessary to do extraordinary things to get extraordinary results.
As an investor you don’t have to try to get rich overnight to eventually get rich.Warren is shooting for a 20% annual rate of return,not a 200% annual rate of return. Invest $100,000 for twenty years at 20% a year and you end up with $3.8 million ;hold it for thirty years and you end up with $23.7 million.You win with the running game – not the long bomb.With the world trying to get an annual return of 100%, a lot of mistakes are being made regarding long-term business economics that make getting a 20% annual return pretty easy.