Thread by @RamBhupatiraju

Great article on some important lessons from Warren Buffett. 👏

Below thread has the 15 lessons/quotes and my comments for each.

medium.com/swlh/16-lesson…

1⃣ “We want the business to be (1) one that we can understand, (2) with favorable long-term prospects, (3) operated by honest and competent people, and (4) available at a very attractive price.”

Understand the company, the industry, the team, and the price. Solid points.

2⃣ “We ordinarily make no attempt to buy equities for anticipated favorable stock price behavior in the short term.”

Filter for and buy Co's with a long-term lens. Get used to under and over valuation in the short term (and ignore when not related to Co performance).

3⃣ “We will reject interesting opportunities rather than over-leverage our balance sheet.”

Be very careful with (or best avoid) leverage in your Portfolio and also buying highly levered Co's (that cannot service the debt with cash flows).

4⃣ “The projections will be dazzling — the advocates will be sincere — but, in the end, major additional investment in a terrible industry usually is about as rewarding as struggling in quicksand.”

The Industry, trends impacting them are also very important factors to consider.

5⃣ “One question I always ask myself in appraising a business is how I would like, assuming I had ample capital and skilled personnel, to compete with it.”

Is there a Moat and is it emerging/expanding/shrinking?

6⃣ “Why should the time required for a planet to circle the sun synchronize precisely with the time required for business actions to pay off?”

Some times, the Business & stock performances are not perfectly correlated to the calendar. Don't over obsess on their YTD performances.

7⃣ “Red lights should start flashing if the five-year average annual gain falls much below the return on equity earned over the period by American industry in aggregate.”

A company worthy of investment should be outpacing industry growth, plain and simple.

8⃣ “The ‘downs’ can be helpful in that they give us an opportunity to expand a position on favorable terms.”

20-50% declines in Quality Co's (in Portfolio or Watchlist) due to Bear Mkt/High Volatility unrelated to underlying biz performance, are great opportunities to load up.

9⃣ “Beware the investment activity that produces applause; the great moves are usually greeted by yawns.”

Irrespective of current hype, or YTD performances of any stock, focus on the Co's that are actually getting stronger (building moats, accelerating Rev, Margin improvement..)

🔟 “When forced to choose, I will not trade even a night’s sleep for the chance of extra profits.”

Investing is a highly personal endeavor depending on the individual's goals, risk tolerance, time horizon, capabilities etc. Do what make sense to you & let you sleep well at night

1⃣1⃣ “Beware of geeks bearing formulas.”

Complexity is not directly correlated to returns. Learn a lot and then keep things simple.

1⃣2⃣ “When investing, pessimism is your friend, euphoria the enemy.”

Understand Mr. Market's behavior and learn how to use that to your advantage at extremes.

1⃣3⃣ “The market outperformed business for a very long period, and that phenomenon had to end.”

Understand how Market sentiment can impact stock prices (discounting or adding premium to the Co's intrinsic value). Know when to be excited (for buying) and when to be cautious.

1⃣4⃣ “People who buy for non-value reasons are likely to sell for non-value reasons.”

When momentum buyers/traders are attracted to a Stock for a reason (mostly only related to the recent stock performance), they could also leave very quickly when the tide turns.

1⃣5⃣ In discussing how managers with bright, but adrenalin-soaked minds scramble after foolish acquisitions, I quoted Pascal: ‘It has struck me that all the misfortunes of men spring from the single cause that they are unable to stay quietly in one room.’”

When there is nothing to do, Do nothing (like buying or selling). Returns are not correlated to the activity levels. You can still use that inactive time to learn though.

/END 👍