You have to have your eyes open all the time and devote yourself, as Charlie Munger says, to lifetime learning. As I like to say, in life as well as in business I'm lucky if I have learned something new every day and I'm doubly lucky if it didn't cost too much to do so.
Selling for me is rarely about pure valuation. The really good ones are too hard to find you don't want to part with them lightly. Life experience tells me that if you sell something at $50 and tell yourself you'll get back in if it goes back down to $35, it will go down to [...]
We are fully aware when valuations are getting stretched, which often coincides with a position getting outsized in the portfolio. In those cases, we will likely take money off the table by managing the position size down.
Our primary frontier of risk management isn't wide diversification, but the quality of the individual businesses, their balance sheets, and the people who run them. In the financial crisis the businesses we owned held up quite well, even if their stock prices didn't. That type of volatility is risk only if you're looking at a [...]
I've never been so disciplined that I hold off buying until 100 percent of the work is done. A workbench position gets built into a core position only when we have little or no question about the business, people and reinvestment opportunities. It takes time to learn how the business model really behaves and I've [...]
In our separate accounts we typically hold 10 to 15 securities. In our partnership we're typically more concentrated, with the top five positions making up about 65 percent of the portfolio. If I didn't have partners, our concentration would be even higher. You know how much of Warren Buffett's partnership held in American Express when [...]
We really don't pay that much attention to why something is undervalued. If we buy companies in which shareholders' capital compounds at a 20 percent rate of return over a reasonable time period and we pay a below-average multiple for it, our investors will do extremely well.
We're looking for managers who have demonstrated they are killers at business execution, and who have a history of always acting in the best interests of all shareholders. I'm not interested, for example, in CEOs who appear personally greedy. I frequently ask CEOs how they measure success. They often speak about meeting the needs of [...]
I'm at a stage in my career where I'd say human behavior is the most important determinant of a business's long-term success. I don't care how smart an analyst you are, you can't really know what's going on inside a business. We want to invest not only in highly capable managers, but also those with [...]
One lesson reinforced by the financial crisis is that if you own common stocks, they will periodically go down 50 percent. We've heard Warren Buffett and Charlie Munger talk about that and I've reminded my clients of it from time to time, but I'd have to say it wasn't particularly top-of-mind before the trouble hit. [...]