The preening duck in a bull market
“In a bull market, one must avoid the error of the preening duck that quacks boastfully after a torrential rainstorm, thinking that its paddling skills have caused it to rise in the world.”
Investing
Warren Buffett's 1997 letter to Berkshire shareholders, one of the letters in Berkshire Hathaway Shareholder Letters, 1971–2025.
Intrinsic value, not book value, counts
“Gains in book value are, of course, not the bottom line at Berkshire. What truly counts are gains in per-share intrinsic business value.”
Not smarter then, just smaller
“We weren't smarter then, just smaller. At our present size, any performance superiority we achieve will be minor.”
Waiting for the fat pitch
“In other words, waiting for the fat pitch would mean a trip to the Hall of Fame; swinging indiscriminately would mean a ticket to the minors.”
Expecting profit, accepting occasional losses
“With alternative investments, we think that we are going to make money. But we also recognize that we will sometimes realize losses, occasionally of substantial size.”
Prospective buyers gain from sinking prices
“Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.”
Insurance surprises are nearly all unpleasant
“As for Berkshire, Charlie and I attempt to be conservative in presenting its underwriting results to you, because we have found that virtually all surprises in insurance are unpleasant ones.”
Catastrophe mispricing stays hidden for years
“A pernicious aspect of catastrophe insurance, however, makes it likely that mispricing, even of a severe variety, will not be discovered for a very long time.”
The paid expert risks nothing
“The expert puts no money on the table. Instead, he receives an up-front payment that is forever his no matter how inaccurate his predictions.”
Careless underwriting makes growth easy
“Of course, any insurer can grow rapidly if it gets careless about underwriting.”
Merit badges, not lottery tickets
“We distribute merit badges, not lottery tickets: In none of Berkshire's subsidiaries do we relate compensation to our stock price, which our associates cannot affect in any meaningful way.”
Asking new partners who else excels
“Whenever we buy into an industry whose leading participants aren't known to me, I always ask our new partners, 'Are there any more at home like you?'”
Integrity counted more than checking contracts
“As was the case with the Blumkins and Bill Child, I had no need to check leases, work out employment contracts, etc. I knew I was dealing with a man of integrity and that's what counted.”
Issuing stock has cost shareholders money
“Though it hurts me to say it, when I've issued stock, I've cost you money.”
Advisors supply projections an enthused CEO wants
“Of one thing, however, be certain: If a CEO is enthused about a particularly foolish acquisition, both his internal staff and his outside advisors will come up with whatever projections are needed to justify his stance.”
Valuing the market without predicting it
“Though we don't attempt to predict the movements of the stock market, we do try, in a very rough way, to value it.”
A cheery consensus carries a high price
“In the summer of 1979, when equities looked cheap to me, I wrote a Forbes article entitled 'You pay a very high price in the stock market for a cheery consensus.'”
Cheery consensus is not necessarily bad timing
“[A very cheery consensus] does not necessarily mean this is the wrong time to buy stocks: Corporate America is now earning far more money than it was just a few years ago, and in the presence of lower interest rates, every dollar of earnings becomes more valuable.”
High prices have eroded the margin of safety
“Today's price levels, though, have materially eroded the 'margin of safety' that Ben Graham identified as the cornerstone of intelligent investing.”