A Quote by Warren Buffett
In our view, though, investment students need only two well-taught courses-How to Value a Business, and How to Think about Market Prices. Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily-understandable business who's earnings are virtually certain to be materially higher five, ten and twenty years from now.
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Investment students need only two well-taught courses - How to Value a Business and How to Think About Market Prices
To invest successfully, you need not understand beta, efficient markets, modern portfolio theory, option pricing or emerging markets. You may, in fact, be better off knowing nothing of these. That, of course, is not the prevailing view at most business schools, whose finance curriculum tends to be dominated by such subjects. In our view, though, investment students need only two well-taught courses - How to Value a Business, and How to Think About Market Prices.
Value in relation to price, not price alone, must determine your investment decisions. If you look to Mr Market as a creator of investment opportunities (where price departs from underlying value), you have the makings of a value investor. If you insist on looking to Mr Market for investment guidance however, you are probably best advised to hire someone else to manage your money.
Near the top of the market, investors are extraordinarily optimistic because they've seen mostly higher prices for a year or two. The sell-offs witnessed during that span were usually brief. Even when they were severe, the market bounced back quickly and always rose to loftier levels. At the top, optimism is king, speculation is running wild, stocks carry high price/earnings ratios, and liquidity has evaporated. A small rise in interest rates can easily be the catalyst for triggering a bear market at that point.
If you're looking for investment you've got to think about what the investor gets from being involved with your business. A lot of people think about what they're getting from their point of view but not about what the investor gets out of a deal.
I think Virgin Blue is still a very promising and exciting business.
Now, I know that's not a view that's widely held in the market but I think the market is simply throwing it into the too-hard basket at the present time because of the oil price events.
But we think it is still a very exciting business.
Business education must constantly be changing and being updated to improve the quality of the student experience. On line courses will be a key part of supplementing course offerings and providing opportunities for life-long learning. Like any industry, business schools must continue to think and re-think how they add value to students and create thought leadership.
The value of market esoterica to the consumer of investment advice is a different story. In my opinion, investment success will not be produced by arcane formulae, computer programs or signals flashed by the price behavior of stocks and markets. Rather an investor will succeed by coupling good business judgment with an ability to insulate his thoughts and behavior from the super-contagious emotions that swirl about the marketplace.
The reality is that business and investment spending are the true leading indicators of the economy and the stock market. If you want to know where the stock market is headed, forget about consumer spending and retail sales figures. Look to business spending, price inflation, interest rates, and productivity gains.
The most realistic distinction between the investor and the speculator is found in their attitude toward stock-market movements. The speculator's primary interest lies in anticipating and profiting from market fluctuations. The investor's primary interest lies in acquiring and holding suitable securities at suitable prices. Market movements are important to him in a practical sense, because they alternately create low price levels at which he would be wise to buy and high price levels at which he certainly should refrain from buying and probably would be wise to sell.
I'm a firm believer that to really understand a business takes years, not months. As an investment analyst you think you understand a business from the outside, but the reality is that, once you are inside, you can go on learning for five or ten years.
The goal of business should not be to do business with anyone who simply wants what you have. It should be to focus on the people who believe what you believe. When we are selective about doing business only with those who believe in our WHY, trust emerges.
I can find only three kinds of business in the universe: mine, yours and God's. Much of our stress comes from mentally living out of our business. When I think, "You need to get a job, I want you to be happy, you should be on time, you need to take better care of yourself," I am in your business. When I'm worried about earthquakes, floods, war, or when I will die, I am in God's business. If I am mentally in your business or in God's business, the effect is separation.
Ben's Mr. Market allegory may seem out-of-date in today's investment world, in which most professionals and academicians talk of efficient markets, dynamic hedging and betas. Their interest in such matters is understandable, since techniques shrouded in mystery clearly have value to the purveyor of investment advice. After all, what witch doctor has ever achieved fame and fortune by simply advising 'Take two aspirins'?
There are no bad business and investment opportunities, but there are bad entrepreneurs and investors. To be a successful business owner and investor, you have to be emotionally neutral to winning and losing. Winning and losing are just part of the game. The size of your success is measured by the strength of your desire, the size of your dream and how you handle disappointment along the way.
If you aren't willing to own a stock for ten years, don't even think about owning it for ten minutes. Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also will the portfolio's market value.
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