“Thus, our derivative positions will sometimes cause large swings in reported earnings, even though Charlie and I might believe the intrinsic value of these positions has changed little. He and I will not be bothered by these swings – even though they could easily amount to $1 billion or more in a quarter – and… Continue reading →
“…we do not measure the progress of our investments by what their market prices do during any given year. Rather, we evaluate their performance by the two methods we apply to the businesses we own. The first test is improvement in earnings, with our making due allowance for industry conditions. The second test, more subjective,… Continue reading →
“Long-term competitive advantage in a stable industry is what we seek in a business. If that comes with rapid organic growth, great. But even without organic growth, such a business is rewarding. We will simply take the lush earnings of the business and use them to bu similar businesses elsewhere. There’s no rule that you… Continue reading →
“A truly great business must have an enduring “moat” that protects excellent returns on invested capital. The dynamics of capitalism guarantee that competitors will repeatedly assault any business “castle” that is earning high returns. Therefore a formidable barrier such as a company’s being the low cost producer or possessing a powerful world-wide brand is essential… Continue reading →
“When a problem exists, whether in personnel or in business operations, the time to act is now.” Berkshire Hathaway – Letters to Shareholders, p.545 Buffett and Munger admit that shareholders would be better off if they had immediately ended Gen Re’s vast derivative trading program.
Business Guideline: “Our failure here illustrates the importance of a guideline – stay with simple propositions – that we usually apply in investments as well as operations. If only one variable is key to a decision, and the variable has a 90% chance of going your way, the chance for a successful outcome is obviously… Continue reading →
Bull! by Maggie Mahar The Smartest Guys in the Room by Bethany McLean and Peter Elkind In an Uncertain World by Bob Rubin
Stock options are a form of compensation; therefore earnings should reflect this expense. “If compensation isn’t an expense, what is it? And, if expenses shouldn’t go into the calculation of earnings, where in the world should they go?” Buffett