- Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.
- The propensity to gamble is increased by a large prize versus a small entry fee, no matter how poor the true odds may be.
- Derivatives are like sex. It’s not who we’re sleeping with, it’s who they’re sleeping with that’s the problem.
- Wall Street makes its money on activity. You make your money on inactivity.
- I will tell you the secret to getting rich on Wall Street. You try to be greedy when others are fearful. And you try to be fearful when others are greedy.
- The future is never clear; you pay a very high price in the stock market for a cheery consensus. Uncertainty actually is the friend of the buyer of long-term values.
- We know that the less prudence with which others conduct their affairs, the greater the prudence with which we should conduct our own affairs.
- For some reason, people take their cues from price action rather than from values. What doesn’t work is when you start doing things that you don’t understand or because they worked last week for somebody else. The dumbest reason in the world to buy a stock is because it’s going up.
- The stock market is a device for transferring money from the impatient to the patient.
- Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future.
- Buy a stock the way you would buy a house. Understand and like it such that you’d be content to own it in the absence of any market.
- The market is there only as a reference point to see if anybody is offering to do anything foolish. When we invest in stocks, we invest in businesses.
Charlie Munger is an American investor, businessman, former real estate attorney, architectural designer, and philanthropist. He is vice chairman of Berkshire Hathaway, the conglomerate controlled by Warren Buffett.
Philip Arthur Fisher (September 8, 1907 – March 11, 2004) was an American stock investor best known as the author of Common Stocks and Uncommon Profits, a guide to investing that has remained in print ever since it was first published in 1958.
Fisher made his clients extraordinarily rich and is recognized by Morningstar as “one of the great investors of all time”. Despite this, he isn’t well known.
Although Fisher was known as a growth investor, top value investors like Warren Buffett were influenced by his work. Buffett has called Fisher’s book “Common Stocks and Uncommon Profits” a “very, very good book”.
Fisher’s methodology was to conduct extensive research on industries and companies. Below are 15 key considerations that he used to help frame his research.
15 Points to Look for in a Common Stock
- Does the company have products or services with sufficient market potential to make possible a sizable increase in sales for at least several years?
- Does the management have a determination to continue to develop products or processes that will still further increase total sales potentials when the growth potentials of currently attractive product lines have largely been exploited?
- How effective are the company’s research and development efforts in relation to its size?
- Does the company have an above-average sales organization?
- Does the company have a worthwhile profit margin?
- What is the company doing to maintain or improve profit margins?
- Does the company have outstanding labor and personnel relations?
- Does the company have outstanding executive relations?
- Does the company have depth to its management?
- How good are the company’s cost analysis and accounting controls?
- Are there other aspects of the business, somewhat peculiar to the industry involved, which will give the investor important clues as to how outstanding the company may be in relation to its competition?
- Does the company have a short-range or long-range outlook in regard to profits?
- In the foreseeable future will the growth of the company require sufficient equity financing so that the larger number of shares then outstanding will largely cancel the existing stockholders’ benefit from this anticipated growth?
- Does the management talk freely to investors about its affairs when things are going well but “clam up” when troubles and disappointments occur?
- Does the company have a management of unquestionable integrity?
Warren Buffett and Charlie Munger get questioned about their investing principles at the 1995 Berkshire Hathaway annual meeting.
“We’re trying to find a a business with a wide and long lasting moat around it surrounded and with protecting a terrific economic Castle with an honest Lord in charge.” — Warren Buffett (1995)
Rare Warren Buffett Interview: How to Pick Stocks & Get Rich (1985).
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