February 26, 2018

10 Gems from Buffett’s 2018 Annual letter

In our search for new stand-alone businesses, the key qualities we seek are durable competitive strengths;able and high-grade management; good returns on the net tangible assets required to operate the business;opportunities for internal growth at attractive returns; and, finally, a sensible purchase price

Our aversion to leverage has dampened our returns over the years. But Charlie and I sleep well. Both of us believe it is insane to risk what you have and need in order to obtain what you don’t need.

The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own.

Betting on people can sometimes be more certain than betting on physical assets.

Charlie and I view the marketable common stocks that Berkshire owns as interests in businesses, not as ticker symbols to be bought or sold based on their “chart” patterns, the “target” prices of analysts or the opinions of media pundits.

There is simply no telling how far stocks can fall in a short period. Even if your borrowings are small and your positions aren’t immediately threatened by the plunging market, your mind may well become rattled by scary headlines and breathless commentary. And an unsettled mind will not make good decisions.

Performance comes, performance goes. Fees never falter.

Though markets are generally rational, they occasionally do crazy things. Seizing the opportunities then offered does not require great intelligence, a degree in economics or a familiarity with Wall Street jargon such as alpha and beta.

What investors then need instead is an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals. A willingness to look unimaginative for a sustained period – or even to look foolish – is also essential.

Stick with big, “easy” decisions and eschew activity

Source: https://stockandladder.com/10-gems-from-buffetts-2018-annual-letter

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