Recurring aspects of human nature that have gotten people into trouble: hubris, dogma and haste. The keys to our investing approach are the symmetrical opposite of that: humility, flexibility, and patience.
If I had to identify a single key to consistently successful investing, I’d say its “cheapness”.
We aren’t obsessed with perfection and quality. I’ve made some very nice investments in companies that were going from terrible to bad or bad to fair. We’re just looking for the biggest mismatch between value and price – where those occur on the quality scale can change over time.
I’m generally not obsessed with quality. Good assets bought at the wrong price can be terrible investments, just as lousy ones bought very cheaply can generate excellent results.
To succeed in the investment business it helps if you’re smart and it helps if you work hard, but what is most critical to success is that when you have conviction, you stick with it.
You pay a very high price for a cheery consensus.
When all feels calm and prices surge, the markets may feel safe; but, in fact, they are dangerous because few investors are focusing on risk. When one feels in the pit of one’s stomach the fear that accompanies plunging market prices, risk-taking becomes considerably less risky, because risk is often priced into an asset’s lower market valuation. Investment success requires standing apart from the frenzy – the short-term, relative performance game played by most investors.
You should invest as if the market is going to be closed for the next five years.
The more specialized the knowledge necessary to understand a business, the less likely we’ll invest in it.