There is this saying, "A foolish man learns from his mistakes. A wise man learns from other peoples mistakes." Many great investors and intellectual minds have given some great advice. Why not learn from them?
"To carry ones eggs in a great number of baskets without having time or opportunity to discover how many have holes in the bottom is the surest way of increasing risk and loss."
-John Maynard Keynes
Focus investing before Buffett. What you can get from this quote is that over-diversifying or even diversifying without having the "opportunity" to do the right analysis is foolish and will hurt returns.
Buffett was a student of Benjamin Graham and Graham had a big influence on him as an investor. He always kept Graham's teachings but Phil Fisher and Charlie Munger had a big influence on him later.
Risk comes from not knowing what you're doing.
Paying attention to contemporary theories like beta, volatility, risk of loss are barriers to the investor that knows what they are doing and has a sound thesis for buying a stock. Are so called growth stocks riskier than so called value stocks? What does risk mean? The market is not efficient, just do your damn homework! When Buffett bought The Washington Post you could have sold it to many investors for more than the market price but beta said it was risky. Is buying a $1 for $.60 risky just because the price fluctuates? No!
"There seems to be some perverse human characteristic that likes to make easy things difficult. The academic world, if anything, has actually backed away from the teaching of value investing over the last 30 years. It's likely to continue that way. Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace, and those who read their Graham & Dodd will continue to prosper."
-Warren E. Buffett from speech at Columbia Business School 1984
This is from an essay by Warren Buffett in response to disproving the efficient market theory. He showed the market beating results of all the students of Ben Graham and proved that it is no coincidence. I really recommend that speech "The Super Investors of Graham and Doddsville." Excerpts are all over the Internet. "The Intelligent Investor" I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful."
Armed with a contrarian view an investor who finds real value in stocks others are scared to own will do well. Fear and greed cloud investing judgement and will always be around to be taken advantage of.
The stock market is a no-called-strike game. You don't have to swing at everything--you can wait for your pitch.
I think this is a great quote not only for professional investors but for the individual investor. The individual investor can sit on a bunch of cash or not invest much in an over-valued market. They aren't always invested like fund managers who have to be as well as diversified. If a small investor sees an opportunity they can put as much as they please into a stock. I think this also applies to buying great companies at great prices, what Buffett loves to do. Sure you can get a good price every year or so in some great companies but it may take some big bad news or a slip-up by the company to get that great long-term price.
"When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is usually the reputation of the business that remains intact."
The competitive landscape and how businesses live doesn't have mercy on great managers. Don't put to much faith in management to help a poor company. To much else is involved. This is a little off the topic of the quote but management can be underestimated and can do powerful things to companies. Just look at Apple Computer and how it has changed over the last 6 year.
"At some point in its life, almost every stock is a bargain; at another time, it will be expensive. Although there are good and bad companies, there is no such thing as a good stock; there are only good stock prices, which come and go. "
Exploiting the inefficient market works. One can't get to attached to the stock price. It is just a price. The value is what one should concentrate on and understand how the market gets greedy and gives a bad price and how it gets fearful and gives a good price.
"Confronted with the challenge to distill the secret of sound investment into three words, we venture the motto: Margin of Safety."
Calculating intrinsic value of a stock and company is not precise so if you can allow for some discrepancy you will do fine. It also means that even if you are right a margin of safety will increase ones returns and is a sound strategy. It definitely applied to his net quick liquidation stock portfolio he held but to other investments as well. Would you rather pay $10,000 for a $10,000 car or $6,600?
"The true investor scarcely ever is forced to sell his shares, and at all other times he is free to disregard the current price quotation. He need pay attention to it and act upon it only to the extent that it suits his book, and no more. Thus the investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. That man would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by other persons' mistakes of judgment."
"In the short term the market is a voting machine, in the long-term it is a weighing machine."
The market is not efficient, eventually the true value of a company will be reflected by the stock price. I have actually struggled with this idea that the business fundamentals have to be reflected by the stock price over a year or so. I think this quote applies to the lifetime of a stock and company but stocks are a reflection of the future discounted to the present. Yes, eventually the stock price will catch up to value with a buyout or say a huge panic induced fall or a bankrupt companies shares trading for 0 but years can pass until then. This quote also reinforces the psychology behind stock prices and that fear can be exploited if you look into it.
"Stockpicking is both an art and a science, but too much of either is a dangerous thing. A person infatuated with measurement, who has his head stuck in the sands of the balance sheets, is not likely to succeed. If you could tell the future from a balance sheet, then mathematicians and accountants would be the richest people in the world by now."
You have to understand the dynamic environment of business and economics and understand how to invest and at the right prices. You have to take everything into account but not every ratio, analysis, possible short-coming is the end all. Experience and knowing WHAT math to put the most emphasis on is the most important part of investing in stocks.
"Investment is most intelligent when it is most businesslike"
I have only read a newer version which is really good of The Intelligent Investor Security Analysis,The Intelligent Investor: The Classic Text on Value Investing and Peter Lynch's first book One Up On Wall Street : How To Use What You Already Know To Make Money In The Market. I only read Beating the Street.
This is a good book with Buffett quotes, Warren Buffett Speaks: Wit and Wisdom from the World's Greatest Investor.