Will Rogers once said, “Good judgment comes from experience, and a lot of that comes from bad judgment.” I add to my base of experience every day.
In a typical year, the average large-cap stock fluctuates about 50 percent from its low to its high. If you've done your homework and you're patient, more than enough opportunities to buy will come along.
The most important aspect of analyzing management is how well they've invested cash in the past, not what they say they are going to do. Because we typically own companies generating a lot of free cash flow, we're in trouble if management doesn't allocate that cash wisely.
We're not usually looking for the scruffy cyclical or turnaround story, but for businesses with high market shares in their principal product or service lines, with long product cycles but short customer-repurchase cycles, and with relatively low capital requirements that allow the company to generate high cash returns on tangible assets while growing. We've always [...]