The ideal form of common stock analysis leads to a valuation of the issue which can be compared with the current price to determine whether or not the security is an attractive purchase.
The only thing you should do with pro forma earnings is ignore them.
The margin of safety is always dependent on the price paid. It will be large at one price, small at some higher price, nonexistent at some still higher price.
High valuations entail high risks.
Even defensive portfolios should be changed from time to time, especially if the securities purchased have an apparently excessive advance and can be replaced by issues much more reasonable priced.
A defensive investor can always prosper by looking patiently and calmly through the wreckage of a bear market.
The best values today are often found in the stocks that were once hot and have since gone cold.
Avoid second-quality issues in making up a portfolio unless they are demonstrable bargains.
Mr. Market’s job is to provide you with prices; your job is to decide whether it is to your advantage to act on them. You no not have to trade with hime just because he constantly begs you to.
The beauty of periodic rebalancing is that it forces you to base your investing decisions on a simple, objective standard.
We urge the beginner in security buying not to waste his efforts and his money in trying to beat the market. Let him study security values and initially test out his judgment on price versus value with the smallest possible sums.
There is no reason to feel any shame in hiring someone to pick stocks or mutual funds for you. But there’s one responsibility that you must never delegate. You, and no one but you, must investigate whether an adviser is trustworthy and charges reasonable fees.
The essence of investment management is the management of risks, not the management of returns.
In an ideal world, the intelligent investor would hold stocks only when they are cheap and sell them when they become overpriced, then duck into the bunker of bonds and cash until stocks again become cheap enough to buy.
At heart, “uncertainty” and “investing” are synonyms.
The investor should be aware that even though safety of its principal and interest may be unquestioned, a long term bond could vary widely in market price in response to changes in interest rates.
Nothing important on Wall Street can be counted on to occur exactly in the same way as it happened before.
Mr. Market does not always price stocks the way an appraiser or a private buyer would value a business. Instead, when stocks are going up, he happily pays more than their objective value; and, when they are going down, he is desperate to dump them for less than their true worth.
Instead of passing blithely over into that Promised Land, flowing almost literally with milk and honey, it may be our destiny to wander a full 40 years or more in the wilderness of doubt and divided sentiments.
Wall Street has a few prudent principles; the trouble is that they are always forgotten when they are most needed.