Disciplined investors are often trying to find the key investing principals that they can apply that will tell them when to make an investment. However, Warren Buffett points out that it is not that simple.
“People always want a formula. They go to The Intelligent Investor and they think, you know, somewhere they’re going to give me a little formula and then I can plug this in and I know I’ll make lots of money. And it really doesn’t work that way,” Warren Buffett said at the 2002 Berkshire Hathaway Annual Meeting. “What you’re trying to do is look at all the cash a business will produce between now and judgment day, and discount it back at a rate that’s appropriate, and then buy it a lot cheaper than that…So, I wouldn’t want to have a single yardstick, or a, you know, relative P/E that I went by.”
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© 2022 David Mazor
Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.