Investment results carry little momentum
“A disadvantage of [the Partnership] is that it does not possess momentum to any significant degree.”
Investing
Warren Buffett's 1965 letter to Buffett Partnership partners, one of the letters in Buffett Partnership Letters, 1957–1970.
Loss years are certain, outperformance still expected
“We are going to have loss years and are going to have years inferior to the Dow - no doubt about it. But I continue to believe we can achieve average performance superior to the Dow in the future.”
Pride demands judging your own recommendations
“Pride alone should be sufficient to demand that each or us determine objectively the quality of his recommendations. This can hardly be done without precise knowledge of the outcome.” — Frank Block
Some managers prefer not knowing their results
“The sad fact is that some seem to prefer not to know how well or poorly they are doing.” — Frank Block
Preset yardsticks curb rationalizing poor results
“[Setting up yardsticks] means that past successes cannot cloud judgment of current results. It should reduce the chance of ingenious rationalizations of inept performance.”
Control commands a price small buyers refuse
“A private owner was quite willing (and in our opinion quite wise) to pay a price for control of the business which isolated stock buyers were not willing to pay for very small fractions of the business.”
Knowing your own thought process is an advantage
“I believe the investor operates at a distinct advantage when he is aware of what path his thought process is following.”
Hundred-stock portfolios defy the goal of performance
“If good performance of the fund is even a minor objective, any portfolio encompassing one hundred stocks (whether the manager is handling one thousand dollars or one billion dollars) is not being operated logically.”
The Noah School of Investing
“Anyone owning [one hundred stocks] after presumably studying their investment merit (and I don't care how prestigious their labels) is following what I call the Noah School of Investing - two of everything.”
More selections trade expected results for steadiness
“The greater the number of selections, the less will be the average year-to-year variation in actual versus expected results. Also, the lower will be the expected results, assuming different choices have different expectations of performance.”
Accepting bumpier years for better long-term results
“I am willing to give up quite a bit in terms of leveling of year-to-year results (remember when I talk of ‘results,’ I am talking of performance relative to the Dow) in order to achieve better overall long-term performance.”
Rare opportunities justify heavy concentration
“We are obviously only going to go to 40% in very rare situations - this rarity, of course, is what makes it necessary that we concentrate so heavily, when we see such an opportunity.”
Advice on adequate diversification goes unexplained
“All texts counsel 'adequate' diversification, but the ones who quantify 'adequate' virtually never explain how they arrive at their conclusion.”