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Thursday, January 18, 2018

Very Good Quotes by GREAT SIFUS (Compiled by Calvin Tan)

Author: calvintaneng | Publish date: Thu, 18 Jan 2018, 02:52 PM 

A)Warrent Buffet's Phrase




The Peter Lynch Crayon Test Could Save Your Investment Portfolio



Peter Lynch, the gentleman that achieved 29% annual returns while running Fidelity’s Magellan Fund from 1977 through 1990, is famous for saying that you should never invest in any idea that you can’t illustrate with a crayon. A variation of this advice is that you should never own a business where it takes more than a few sentences to explain how the company turns a profit.

The highest-quality businesses can usually be explained quite simply.

Coca-Cola makes its profits by making syrup concentrates that allow them to make about $0.30 or so on every dollar once it is said and done.

Hershey sells chocolate in varying serving sizes in such a way that the company can achieve 16% total returns on assets.

Philip Morris International manufactures cigarettes for pennies per pack, and sells them for $5-$10 per pack.

Procter & Gamble sells household products like Tide Laundry Detergent, Gillette razors, and Duracell batteries. It has so many products that 398 out of every 400 American homes contain a product somewhere that is manufactured by P&G.


Pepsi sells soft drinks, snacks, and breakfast foods, leveraging a diversified stream of profits from soda, Quaker Oats, and Frito-Lay to create lasting profits even in the worst of recessions.

Colgate-Palmolive sells toothpaste and dish soap in a way that allows it to achieve 30% or so returns on equity, which explains why the company has been making dividend payments every year dating back to 1895.

Wal-Mart sells hundreds of billions of dollars of merchandise each year while collecting about 3% or so in net profit on each item after it is all said and done, and the high volume churn explains why the company is able to make such substantial profits for its shareholder owners.

McDonalds well franchise its hamburger joint out to individual managers, who have to pay substantial rent and a percentage of costs to the parent company. This allows the company to profit immensely from every fast food operation while limiting the downside associated with restaurants that do not perform well.

Now explain to me exactly how Citigroup and Linn Energy generate each dollar of profit. See what I mean?

Peter Lynch’s crayon test is a variation of Warren Buffett’s advice to know your circle of competence when it comes to investing, and always stay within that circle. Peter Lynch’s crayon test is a nice metaphor that allows you to refocus on owning companies that generate profits you can easily understand.


If you scroll through your current stock holdings, could you easily explain why you own each one of them?

I’m probably the dumbest investor out there. There are only one hundred or so companies out of 15,000+ whose profits I easily understand, and feel I can reasonably predict going forward. But sticking with the Johnson & Johnson’s and Nestle’s of the world is no confinement. They compound wealth just fine. Having a narrow circle of competence is no problem when you’re building. It’s the ability to honestly acknowledge what you do understand and do not understand that makes all the difference.

After all, if you do not understand how Gilead Sciences makes its profits, do you really think you’d be able to hold on if the stock fell 50?


On the other hand, Coca-Cola could fall to $20 per share, and I’d be able to walk through Wal-Mart and see the Coca-Cola flying off the shelves. I’d see the Coca-Cola trucks on the highway. I’d be able to read the financial reports about how the company has 500+ beverage brands making over $10 billion in annual profits in just about every country in the world. When you understand a company on that level, it is much easier to not only withstand substantial stock price declines, but treat them as the opportunities that they are to buy more.

By Tim McAleenan, Jr



Successful stocks don't tell you when to sell. When you feel like bragging, it's probably time to sell.
John Neff

I've never bought a stock unless, in my view, it was on sale.
John Neff

Buy on the cannons and sell on the trumpets.
John Neff

Brand-name growth stocks ordinarily command the highest p/e ratios. Rising prices beget attention, and vice versa - but only to a point. Eventually their growth rate can diminish as results revert towards normal. Maybe not in all cases, but often enough to make a long-term bet. Bottom line: I wouldn't want to get caught in a rush for the exit, much less get left behind. Only when big growth stocks fall into the dumper from time to time am I inclined to pick them up - and even then, only in moderation.
John Neff

I don't want a lot of good investments; I want a few outstanding ones.
John Neff

An awful lot of people keep a stock too long because it gives them warm fuzzies – particularly when a contrarian stance has been vindicated. If they sell it, they lose bragging rights.
John Neff

I don't read, much less follow, the valuations or predictions. I study the numbers.
John Neff

Investment success does not require glamour stocks or bull markets.
John Neff


When you buy a depressed company it’s not going to go up right after you buy it, believe me

– Walter Schloss

You never get the high and you never get the low

– Walter Schloss

Each year we buy stocks and they go up, we sell them and then we try to buy something cheaper

– Walter Schloss

Ben’s emphasis was on protecting his expectation of profit with minimum risk

– Walter Schloss

We like to buy stocks which we feel are undervalued and then we have to have the guts to buy more when they go down

– Walter Schloss

I found that it was much better to look at the figures rather than people

– Walter Schloss

Basically, we try to buy value expressed in the differential between its price and what we think its worth

– Walter Schloss

Ben (Graham) didn’t want to lose money. He had had a rough time during the depression

– Walter Schloss

Try to buy assets at a discount than to buy earnings

– Walter Schloss

Buy stocks where the outlook is not good

– Walter Schloss

The market is a very emotional place that appeals to fear and greed

– Walter Schloss

Earnings can change dramatically. Usually assets change slowly

– Walter Schloss

Timidity prompted by past failures causes investors to miss the most important bull markets

– Walter Schloss

Look at companies selling at new lows

– Walter Schloss

I was in Graham’s office the day he bought GEICO. Warren owns one-third of the stock today

– Walter Schloss

Graham liked the idea of protection on the downside

– Walter Schloss

I’m not very good on timing. In fact, I’ve stayed away from it

– Walter Schloss

Stockbrokers aren’t too interested in a stock you can sit there for five years with

– Walter Schloss

Our average holding period is four years

– Walter Schloss

If there are not too many value stocks that I can find, the market isn’t all that cheap

– Walter Schloss

If the market were way over priced, I wouldn’t own any stocks

– Walter Schloss

Remember that a share of stock represents a part of a business and is not just a piece of paper

– Walter Schloss

Don’t be afraid to be a loner but be sure that you are correct in your judgement

– Walter Schloss

I find it helpful to buy near the low of the last few years

– Walter Schloss

Fear and greed are probably the worst emotions to have in connection with the purchase and sale of stocks

– Walter Schloss

Use book value as a starting point to try and establish the value of the enterprise

– Walter Schloss



Warren Buffett is one of the richest men on the planet and in the investment world he is seen as one of the best investors of all time. His decisions have made him billions many times over.

However what is his secret? What does he do that gives him that mental edge?

It’s actually quite simple. He reads a lot!

One time he was asked what the secret to success is. This is his reply:

“Read 500 pages like this every day. That’s how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it.“

That’s it. This is what gives him the combinatorial mental powers that he has. The more he reads, the more information he has, the more things he can combine.

It also makes him less impulsive and more rational. To quote him again:

“I read and think. So I do more reading and thinking, and make less impulse decisions than most people in business. I do it because I like this kind of life.“

His investment partner, Charlie Munger, also reads a lot. From all the information he reads, he creates a select amount of mental models, which he then uses to guide him when making investment decisions, as well as many other decisions in life.

For him, reading a lot (and a variety of books) is fundamental:

“In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time – none, zero.“

If you look at many of the successful people of today, the expert-generalists that have created the iconic enterprises of the past decades, they share this exact same trait with Buffett and Munger. They read a lot.

When he was young and beginning his investing career, Buffett would read between 600 and 1000 pages a day! He still spends about 80% of his day reading.

I already mentioned that Elon Musk also reads like 2 books a day. Bill Gates reads 50 books a year. In the old days, guys like Thomas Jefferson or Benjamin Franklin would also spend their days reading a variety of books.

As Benjamin Franklin said:
“An investment in knowledge always pays the best interest.“

Calvin comments:

BY STANDING ON THE SHOULDERS OF THESE CHAMPION SIFUS WE CAN SEE FURTHER & DO BETTER.

MAY ALL INVEST WISELY AND PROSPER IN YEAR 2018

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