Three Investment Lessons I've Learned From Warren Buffett
by Dr. Mark Skousen, Investment U Contributing Editor
Friday, November 18, 2011: Issue #1646
"Great little book. I plan to shamelessly steal some of the lines."
- Warren Buffett
For the past 30 years, I've been collecting old adages, clever lines and poems about Wall Street, which I've now published in a new book called The Maxims of Wall Street. Old canards like, "Sell in May and go away," and, "Bears make headlines, bulls make money."
It's a unique book - surprisingly, nobody in the two hundred years of Wall Street had collected all the financial sayings in one book.
After completing the compilation, I made a discovery: Of the dozens of financial gurus quoted, I ended up cited Warren Buffett the most - 27 times to be exact. More than J. P. Morgan, John Templeton, Ben Franklin, Jim Dines, Jesse Livermore, John Maynard Keynes, Gerald Loeb, Humphrey Neill and a host of others.
Now that I think about it, that makes perfect sense. Warren Buffett is, after all, the world's wealthiest investor, and a shareholder investing $1,000 in his Berkshire Hathaway at the beginning would be a multi-millionaire today. He has a lot to teach us about how to be a successful investor, and what not to do.
I decided to send a copy to Mr. Buffett. I had met Mr. Buffett last year at the graduation ceremony for Sing Sing inmates who had earned a college degree (my wife and I teach at this incredibly successful program).
Still, I was surprised to get a personal email from him a few days later on 11-11-11 with an unqualified endorsement of the book. He has given permission to publish this letter:
I'm really going to enjoy the little book you sent me. In fact, I plan to shamelessly steal some of the lines. Thanks for thinking of me.
Since then, we've continued to correspond. What can you learn about investing reading these 27 quotations?
The Three Lessons
First, Buffett says you have to be a contrarian to be successful. A few of his favorite quotes:
- "If you wait to see the Robins sing, spring may be over."
- "You can't buy what's popular and do well."
- "Be fearful when others are greedy and greedy when others are fearful."
Right now, as investors are running scared and investing in fixed income and gold, Buffett is on a buying spree in the stock market, adding six new positions in the most recent quarter, including growth companies IBM (NYSE: IBM), Intel (Nasdaq: INTC) and Visa (NYSE: V).
Second, Buffett acts quickly and aggressively when an investment looks right to him. To quote him: "When we see something that makes sense, we act very fast and very big." So he bought Big Blue! In the past three months, Berkshire Hathaway invested $10.7 billion in International Business Machines - his first in a technology company.
For the first time, he felt comfortable buying a big chunk of the service technology company because IBM follows through with its goals. "I don't know of any large company that really has been as specific about what they intend to do and how they intend to do it as IBM," he said. "They did that five years ago, and they've done it ever since."
Third, Buffett is always trying to look for the best prospects in the future. To him future performance is more important than past performance. To quote him: "The investor of today does not profit from yesterday's growth."
He adds: "If past history was all there is to the investment game, the richest people would be librarians."
And: "In the business world, the rearview mirror is always clearer than the windshield."
Good investing, AEIOU,
Editor's Note: If you would like a copy of The Maxims of Wall Street, click here. If you'd like an autographed copy of the first edition, call Eagle Publishing at 1.800.211.7661. It's only $24.95 plus $5 P&S. Mention code MAXIMH. (And also ask about discounts for extra copies for holiday giving.)