Earnings

“The people who tell you the world will end are the ones who die off while the world keeps going.”

“I think that accounting is a very serious issue in a lot of companies. The need to make profits every quarter and to meet analysts’ estimates can be a debilitating force.”

“Generally speaking, bad news tends to develop on the installment plan, and the first earnings revision is usually not the last.”

“Investor anticipations, similar to the laws of economics, are shaped at the margin. That is why changes in earnings estimates follow, for the most part, changes in stock prices, and not vice versa as it should be.”

“Experience teaches us that earnings estimates, especially those of a longer-term nature, are not particularly reliable.”

“The word preferred does not add anything to the value of an issue. If a common stock has just as large earnings applicable to it and no greater deduction ahead of it, it must be more valuable than a similarly situated preferred — because the common stock is entitled to all future earnings and the preferred only to a restricted portion thereof.”

“It is important to make sure that one is not lured by rash enthusiasm into commitments at levels greatly above those soundly warranted by the financial set-up and the earnings record.”

“Current earnings, future prospects, management, marketability are all factors more or less independent of assets which contribute their share to the intrinsic value.”

“Tradition, sentiment, vague generalizations, unsubstantiated rumors, can never be made the basis of sound investment or intelligent speculation. Now and then large profits are realized on no better foundation — merely proving that sometimes luck laughs at logic.”

“Let us define the speculator as one who seeks to profit from market movements, without primary regard to intrinsic values; the “prudent stock investor” as one who (a) buys only at prices amply supported by underlying value, and (b) who determinedly reduces his stock holdings when the market enters the speculative phase of a sustained advance.”

“The true measure of common stocks values, of course, is not found by reference to price movements alone, but by price in relation to earnings, dividends, future prospects and, to a small extent, asset values.”

“The chief hazard of a careful common stock program is not that it may bring unexpected losses, but that its profits will turn the investor into a speculator greedy for quicker and bigger gains — and therefore headed for ultimate disaster.”

“The typical experience of the speculator is one of temporary profit and ultimate loss.”

“Let us define the speculator as one who seeks to profit from market movements, without primary regard to intrinsic value; the prudent stock investor as one who (a) buys only at prices amply supported by underlying value, and (b) who determinedly reduces his stock holdings when the market enters the speculative phase of a sustained advance.”

“The true measure of common stock values, of course, is not found by reference to price movements alone, but by price in relation to earnings, dividends, future prospects and, to a small extent, asset values.”

“If the relative stability of general business and corporate profits produces an unlimited enthusiasm and demand for common stocks, then it must eventually produce instability in stock prices.”

“There are two principal mistakes that nearly all amateurs in the stock market make. The first is to have an inexact knowledge of the securities in which one is dealing, to know too little about a company’s management, its earnings, and prospects for future growth. The second mistake is to trade beyond one’s financial resources, to try to run up a fortune on a shoestring.”

“Rates of return on stocks are a function of three things: beginning dividend yields, growth of earnings, and changes in valuation.”

“Bull markets typically begin when the following four conditions are present: the economy is bottoming, profits are bottoming, the Fed is stimulating, and valuations are low.”

“Stocks tend to bottom when the earnings bottom, or when the fundamentals bottom.”

“Wall Street is pure economics and when profit opportunities look good, debt leverage makes them look better.”

“I think you should try and make your money in this world by selling other people things that are good for them. If you’re selling them gambling services where you rake profits off of the top, like many of these new brokers who specialize in luring the gamblers in, I think it’s a dirty way to make money and I think that we’re crazy to allow it.”

“I didn’t get rich by buying stocks at a high price-earnings multiple in the midst of crazy speculative booms, and I’m not going to change.”

“The great lesson in microeconomics is to discriminate between when technology is going to help you and when it’s going to kill you.”

“If you are selling because of a missed earnings report or the trend of the market or something, you’ve stopped looking at the rate of return the company can achieve over time.”

“The investor is bombarded with staggering amounts of information, staggering amounts of stimuli that are designed to get the investor to buy and sell and trade, to do exactly the wrong thing, to create excessive profits for these intermediaries that aren’t acting in the investor’s best interests.”

“It is not the certainty of disaster ahead but the uncertainty of better days to come that keeps the investor from buying.”

“In the beginning of a stock market boom it is ever the “dear public,” the fleecy lambs, the most guileless victims, who make the most money. They really do not know when to stop winning, and so in the end they lose profit and principal.”

“It is one of the common pieces of Wall Street experience that when the public goes stock mad and the market leaders are filled with the arrogance of prolonged success, such little things as high money rates or decreases in earnings or unraised dividends have no instant effect on the market — that is, on the state of mind of the speculating public. In the end, of course, all violations of the fundamental laws of economic and financial common sense are paid for; but every bull thinks he will unload before the break.”

“You have to learn to profit from market fluctuations rather than suffer from them.”

“It becomes more and more evident that stock prices are not alone determined by high or low credit, earnings or carloadings. There is another mighty factor which cannot be charted along with the various business indices. It is how high or how low are the hearts of men and women during the given period.”

“We’ve seen what happens to companies whose chief executive gets the best press. They are often the ones who end up with the least profits.”

“We tried to buy good companies to start with. We don’t think there are supermen who can renovate them and transform them into wonderful, highly profitable enterprises. We can’t do it, and history shows that nobody else can do it, either.”

“Our accounting is set to maximize cash flow, not reported earnings. Smoothing reported earnings just has to take a backseat.”

“It’s not earnings changes that cause stock price changes, but earnings changes that come as a surprise.”

“Extrapolation is usually right, but not valuable, and predictions of deviation from trends are potentially profitable but rarely right. So far, macro-economic forecasting doesn’t represent the path to superior investments.”

“Potentially profitable, nonconsensus forecasts are very hard to believe in and act on for the simple reason that they are so far from conventional wisdom.”

“Trees don’t grow to the sky, and neither do profit margins”

“We look at the management of corporations that tend to overstate or massage profits as promoters. And that is a kind word.”

“Cash flow was diverging dramatically from reported earnings.”

“Earnings are an opinion. Cash is a fact.”

“Growth does not equal profitability.”

“We want to get more earnings for the price we’re paying.”

“When I started, I didn’t realize that the biggest profits usually come from sitting on a great position — from doing what looks like nothing to the outside world. You have more time than you think, so be patient.”

“There is no clear evidence from experience that the investment policy which is socially advantageous coincides with that which is most profitable.”

“Day-to-day fluctuations in the profits of existing investments, which are obviously of an ephemeral and non-significant character, tend to have an altogether excessive, and even an absurd, influence on the market.”

“We don’t pay attention to quarterly earnings or consensus forecasts. That’s performance investing, not value investing.”

“Wall Street tends to overreact when it gets worried about earnings.”

“In investing, nothing beats the discovery of an undervalued stock, no matter what the nature of its business or the past trend of its earnings.”

“While majority opinion can give any market movement considerable momentum that keeps it going in the same direction, majority opinion is inevitably and consistently wrong at turning points.”

“History shows us, over and over, that bull markets can go well beyond rational valuation levels as long as the outlook for future earnings is positive.”

“Equities are a claim on uncertain future earnings.”

“I don’t think people understand there’s 100% correlation with what happens to a company’s earnings over several years and what happens to the stock.”

“I can’t say enough about the fact that earnings are the key to success in investing in stocks. No matter what happens to the market, the earnings will determine the results.”

“If you don’t believe corporate profits will continue to rise, and you can’t stomach a decline in the market, don’t buy stocks or equity mutual funds.”

“Ultimately, to be an investor in stocks, you have to believe that American business has a decent future, as well as business worldwide, and that corporations will continue to increase their profits.”

“As corporate profits increase, corporations become more valuable, and sooner or later, their shares will sell for a higher price.”

“What makes stocks valuable in the long run isn’t “the market.” It’s the profitability of the shares in the companies you own.”

“It’s in the nature of Wall Street to imagine that whenever a company sets a record for earnings, it will go on setting new ones.”

“The best time to get involved with cyclicals is when the economy is at its weakest, earnings are at their lowest, and public sentiment is at its bleakest.”

“Behind all the smoke and noise on the market’s surface, it’s important to remember that companies — small, medium, and large — make up the market’s backbone. And corporate earnings drive stock prices.”

“I’m bearish when companies’ profits go to hell.”

“If some of the most astute people in Wall Street have frequently guessed wrong in trying to profit by stock market movements, it may not be too much to assume that the attempt itself has represented a misconception of the proper function of management.”

“Despite the advantages of size, wealth, a good name and a long tradition, a large enterprise will cease to be profitable if the men at the head get hardening of the arteries or atrophy of the brain tissue or if their heirs prove unequal to inherited responsibilities. Momentum alone will not carry a business forward under such circumstances. Some younger and more aggressive group will assume the leadership of the industry.”

“In a public service corporation, bad management may curtail profits or produce losses, good management may turn a weak corporation into a strong one.”

“Most useful and most dangerous are the stock market averages, most useful in revealing the general trend of the market, most dangerous if they mislead the trader into forgetting that, after all, his profits depend on the movements of the individual stocks in which he deals.”

“The official who keeps one eye on his business and one on the stock market is not likely long to be numbered among the leaders.”

“The big profits I have made were through very long planning, waiting and watching.”

“I don’t want to spend my time trying to earn a lot of little profits. I want very, very big profits that I’m ready to wait for.”

“It is just appalling the nerve strain people put themselves under trying to buy something today and sell it tomorrow. It’s a small-win proposition. If you are a truly long-range investor, of which I am practically a vanishing breed, the profits are so tremendously greater.”

“It is true that you don’t go broke taking a profit, but that assumes you will make a profit on everything you do. It doesn’t allow for the mistakes you’re bound to make in the investment business.”

“There has always been, and will always be, windfall profits. At any point in time, certain people are being enriched unjustly because they get there very early.”

“Developers are creating a product that meets the developer’s test of profitability, not necessarily the marketplace’s test of economic viability. If the developer believes the creation and presale of the product assure him a profit, then the discipline of the marketplace disappears and oversupply follows.”

“Real estate investment decisions do not lend themselves to macroeconomic issues. Real estate is a local market, by definition. lt is not possible to focus on national trends; one must focus on local issues and characteristics.”

“Nowhere does it say that investors should strive to make every last dollar of potential profit; consideration of risk must never take a backseat to return.”

“As an investor you never have perfect information, and the biggest profits are always available when competition and information are scarce.”

“The object is not to pick winners, but to make profitable bets.”

“Sometimes a company which has a relatively low profit margin is able greatly to increase its sales volume without increasing its capital investment and thereby increase its earnings per share.”

“Detecting with a high degree of accuracy when the long-term earnings growth of a company has ceased is difficult because no mathematical formula can be applied to determine when the change from growth to maturity or decadence occurs.”

“While the trend in profit margins is one of the most important factors to consider, it is not always the company which reports the higher profit margin that proves to be the better growth stock.”

“No mathematical formula or yardstick alone can be relied on for identifying growth stocks or for detecting when their earnings reach maturity.”

“The two best ways of measuring the life cycle of an industry are unit volume of sales and net earnings available for stockholders.”

““Growth stocks” can be defined as shares in business enterprises which have demonstrated favorable underlying long-term growth in earnings and which, after careful research study, give indications of continued secular growth in the future.”

“Earnings of most corporations pass through a life cycle which, like the human cycle, has three important phases — growth, maturity, and decadence.”

“One of the things you should always be doing with your circles of competence is see if you can push it a little bit more, because the world changes. It keeps spinning, and things don’t stay the same, so you always need to be working and learning and studying to make sure that your circles of competence are relevant.”

“The more a business serves others, and the more problems they solve, the more profitable they will be and the more an investor in those enterprises should make.”

“So many investors today focus on earnings, but I focus on assets and don’t try to predict next months’ earnings, which is a much more difficult approach to investing.”

“The thing about buying depressed stocks is that you really have three strings to your bow: 1) earnings will improve and the stocks will go up; 2) someone will come in and buy control of the company; or 3) the company will start buying its own stock and ask for tenders.”

“There is nothing at all conservative, in my opinion, about speculating as to just how high a multiplier a greedy and capricious public will put on earnings.”

“I will not abandon a previous approach whose logic I understand even though it may mean foregoing large and apparently easy, profits to embrace an approach which I don’t fully understand, have not practiced successfully and which, possibly, could lead to substantial permanent loss of capital.”

“The inescapable fact is that the value of an asset, whatever its character, cannot over the long term grow faster than its earnings do.”