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Archive for August 26th, 2021

Sweet Dreams (Are Made Of This)

Favorite Line(s):
Sweet dreams are made of this
Who am I to disagree?
I’ve traveled the world and the seven seas
Everybody’s lookin’ for something
.
On This Day In:
2020 In The Path
Hangin’ Out
But I Won’t Do That
Unless You Are #45
2019 Seeking Nobility
2018 My Family Calls It Hoarding
Day 30: Done & Dusted
2017 Rogers’ Rules (Hexadecimal)
2016 But, It’s Such A Simple Mistake
2015 Crawl Towards The Light
2014 Sweet Songs
2013 The Wife Of An Ordinary Man
2012 Three Words
2011 Know Anyone Like This?
2010 Apoplexy??
When Breaking Up Is Hard To Do…
Sibling Awareness

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Leaving the question of price aside, the best business to own is one that over an extended period can employ large amounts of incremental capital at very high rates of return.  The worst business to own is one that must, or will, do the opposite – that is, consistently employ ever-greater amounts of capital at very low rates of return.  Unfortunately, the first type of business is very hard to find:  Most high-return businesses need relatively little capital.  Shareholders of such a business usually will benefit if it pays out most of its earnings in dividends or makes significant stock repurchases.
Though the mathematical calculations required to evaluate equities are not difficult, an analyst – even one who is experienced and intelligent – can easily go wrong in estimating future “coupons.”  At Berkshire, we attempt to deal with this problem in two ways.  First, we try to stick to businesses we believe we understand.  That means they must be relatively simple and stable in character.  If a business is complex or subject to constant change, we’re not smart enough to predict future cash flows.  Incidentally, that shortcoming doesn’t bother us.  What counts for most people in investing is not how much they know, but rather how realistically they define what they don’t know.  An investor needs to do very few things right as long as he or she avoids big mistakes.
Second, and equally important, we insist on a margin of safety in our purchase price.  If we calculate the value of a common stock to be only slightly higher than its price, we’re not interested in buying.  We believe this margin-of-safety principle, so strongly emphasized by Ben Graham, to be the cornerstone of investment success.
    —     Warren Buffett
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On This Day In:
2020 In The Path
Hangin’ Out
But I Won’t Do That
Unless You Are #45
2019 Seeking Nobility
2018 My Family Calls It Hoarding
Day 30: Done & Dusted
2017 Rogers’ Rules (Hexadecimal)
2016 But, It’s Such A Simple Mistake
2015 Crawl Towards The Light
2014 Sweet Songs
2013 The Wife Of An Ordinary Man
2012 Three Words
2011 Know Anyone Like This?
2010 Apoplexy??
When Breaking Up Is Hard To Do…
Sibling Awareness

Read Full Post »

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