Fortune Watch

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• You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.

• We do not view the company itself as the ultimate owner of our business assets but instead view the company as a conduit through which our shareholders own assets.

• When Berkshire buys common stock, we approach the transaction as if we were buying into a private business.

• Wide diversification is only required when investors do not understand what they are doing.

• Never invest in a business you cannot understand.

• Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.

• The critical investment factor is determining the intrinsic value of a business and paying a fair or bargain price.

• Risk can be greatly reduced by concentrating on only a few holdings.

• Stop trying to predict the direction of the stock market, the economy, interest rates, or elections.

• Buy companies with strong histories of profitability and with a dominant business franchise.

• Be fearful when others are greedy and greedy only when others are fearful.

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• It is optimism that is the enemy of the rational buyer.

• As far as you are concerned, the stock market does not exist. Ignore it.

• The ability to say “no” is a tremendous advantage for an investor.

• Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell.

• Lethargy, bordering on sloth should remain the cornerstone of an investment style.

• An investor needs to do very few things right as long as he or she avoids big mistakes.

• “Turn-arounds” seldom turn.

• Is management rational?

• Is management candid with the shareholders?

• Does management resist the institutional imperative?

• Do not take yearly results too seriously. Instead, focus on four or five-year averages.

• Calculate “owner earnings” to get a true reflection of value.

• Look for companies with high profit margins.

• Growth and value investing are joined at the hip.

• The advice “you never go broke taking a profit” is foolish.

• It is more important to say “no” to an opportunity, than to say “yes”.

• Always invest for the long term.

• Does the business have favorable long term prospects?

• It is not necessary to do extraordinary things to get extraordinary results.

• Remember that the stock market is manic-depressive.

• Buy a business, don’t rent stocks.

• Does the business have a consistent operating history?

• An investor should ordinarily hold a small piece of an outstanding business with the same tenacity that an owner would exhibit if he owned all of that business.